<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED MARCH 31, 1996
COMMISSION FILE NUMBER 0-9607
CENTRUM INDUSTRIES, INC.
------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 45-0341067
- ------------------------------- -------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
WATERPLACE SOUTH, 6135 TRUST DRIVE, SUITE 104A, HOLLAND, OH 43528
- ----------------------------------------------------------- ----------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (419) 868-3441
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
- ----------------------------- ------------------------
NONE NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON CAPITAL STOCK, $.05 PAR VALUE
- --------------------------------------------------------------------------------
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. []
Aggregate market value of voting stock held by non-affiliates of the registrant
at May 31, 1996 (computed by reference to actual trades during the preceding
12-month period): $8,832,486.
Number of shares outstanding of common stock, $.05 par value, as of May 31,
1996: 6,508,527.
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CENTRUM INDUSTRIES, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED MARCH 31, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I PAGE
<S> <C>
Item I. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
PART II
Item 5. Market for Centrum's Common Stock and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . 11
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . 13
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . 21
PART III
Item 10. Directors and Executive Officers of Centrum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . . . . . . . 52
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . 53
</TABLE>
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PART I
ITEM 1. BUSINESS
(a) General Development of Business
FORMATION AND HISTORY OF THE HOLDING COMPANY AND THE BOARD OF DIRECTORS
Centrum Industries, Inc. ("Centrum", the "Company" or the "Company and its
subsidiaries") is a Delaware corporation based, since 1989, in Northwest, Ohio,
which has undergone considerable change over the past five years. (In this
document, years reflect the fiscal year ended March 31, unless otherwise
noted.)
Centrum was incorporated in North Dakota in 1977 under the name "Energy
Resources of North Dakota, Inc." From 1977 until 1989, Centrum's principal
business was the purchase and resale of oil and gas leases and the exploration
and development of oil and gas properties. In 1988, when Energy Resources
Limited Partnership acquired 1,175,000 shares (61.9%) of Centrum's issued and
outstanding common stock, the reorganized Board of Directors determined it
would be in the shareholders' best interest to change Centrum's business
strategy and to move Centrum's principal place of business to Sylvania, Ohio.
In August 1988, Centrum sold all of its producing interests in oil and gas to
Aspen Exploration Corporation ("Aspen") in exchange for 850,000 shares of Aspen
common stock. In December 1994, Centrum sold its shares in Aspen stock for
$34,000.
Since 1989, Centrum has operated as a holding company, with ownership, from
time to time, of both portfolio securities and stock of operating companies.
In November 1990, Centrum's shareholders approved the recapitalization and
reincorporation of Centrum in the State of Delaware. In the merger, the
shareholders of Energy Resources of North Dakota and old Centrum received one
share of common stock of new Centrum in exchange for each share of common stock
held.
In September 1992, Centrum's Board of Directors adopted a restructuring plan.
In October 1992, William C. Davis was elected Chairman of the Board and Chief
Executive Officer and George H. Wells was elected President and Chief Operating
Officer by the Board. The Board also appointed Mr. Wells to the Board of
Directors. Mr. Wells has significant experience operating large manufacturing
corporations, having served as a senior executive with National Forge
Corporation and Doehler-Jarvis for a combined period of 12 years.
In May 1995, Mr. Wells was appointed President and Chief Executive officer.
Mr. Davis was named Vice President.
HISTORY OF ACQUISITIONS - CONTINUING OPERATIONS
In August 1990, Centrum formed a wholly-owned subsidiary known as LaSalle
Exploration, Inc. ("LaSalle"), which acquired an 87.5% leasehold interest for
all mineral rights in a 308.5 acre plot located in Chatham Township in Medina
County, in Northeastern Ohio (the "Techno-Chatham Project") for a purchase
price of $78,691. LaSalle also purchased, as part of the same transaction,
$21,309 in drilling and miscellaneous equipment. LaSalle has been and is
continuing to explore for oil through a shallow sand waterflood project on
eight acres of land at the Techno-Chatham Project. However, this project has
been essentially dormant since March 1992.
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In November 1990, LaSalle entered into a management contract for the
Techno-Chatham Project with F. Michael Syring, which resulted in the March 1992
issuance of 70,000 shares of Centrum's participating preferred stock with a
liquidation value of $10 per share. The preferred shares entitle the holders
to participate in a 20% net working interest in the Techno-Chatham project once
Centrum's gross investment is recovered.
On May 17, 1993, all the outstanding common stock of Micafil, Inc. "(Micafil"),
a Delaware corporation, was purchased by Centrum from Asea Brown Boveri, Inc.
("ABB"). Micafil designs and manufacturers armature winding machines for
motors primarily used in the automotive industry and in industrial
applications. The purchase method of accounting was used to account for this
business combination. The total purchase price of approximately $1,750,000 was
paid in the form of two promissory notes issued to the seller. The terms of
the notes were as follows: a promissory note in the amount of $1,650,000 plus
interest at 8%, principal and interest payable in 60 monthly installments of
$33,456; and a promissory note in the amount of $100,000 plus interest at 8%
with a $52,533 principal interest payment due December 30, 1993 and the final
principal and interest payment due March 31, 1994. The principal amount of the
second note included $84,000 relating to a five year non-competition agreement
with the seller. During 1995, the Company repaid the remainder of the $100,000
note and reached an agreement to restructure the $1,650,000 note.
On September 2, 1993, the Company purchased the stock of American Handling,
Inc. ("AH") through a subsidiary merger. AH is engaged in the business of
designing, manufacturing and installing material handling equipment. AH became
a wholly-owned subsidiary of Centrum, and holders of issued and outstanding
shares of AH common stock received an aggregate amount of 2,681,620 shares of
Centrum's restricted common stock with a fair market value, estimated by the
management of Centrum, of $2,294,000. Additionally, four employees of AH
converted existing options in AH for 241,828 shares of Centrum's common stock
having an option exercise price of $.372 per share.
On March 8, 1996, the Company purchased all of the outstanding stock of McInnes
Steel Company ("McInnes") through a subsidiary merger. McInnes, with operating
subsidiaries located in Northwestern Pennsylvania, produces open die steel
forgings for the power generation, compressor and other industrial markets.
McInnes also produces seamless steel rolled rings for bearing and special
machine manufacturers and nonferrous castings for the glass container
manufacturers and pump and valve industries. Sales of McInnes' products are
made to both domestic and international customers. The purchase method of
accounting was used to account for this business combination. The total
purchase price of approximately $12.3 million was financed primarily in the
form of new debt agreements and the sale of the Company's common stock. The
first agreement consists of a promissory note issued to a commercial bank for
$2,850,000, payable monthly at 1.25% above the prime rate, and a line-
of-credit for the lesser of $15,500,000 or "borrowing base," as defined in the
agreement. The second debt agreement is a Note and Warrant Purchase Agreement
which provides for $2,500,000 aggregate principal amount of 11% convertible
debt with warrants for the purchase of 1,250,000 shares of the Company's common
stock for $2 per share. Additional funds to finance the acquisition were
obtained through the sale of 485,500 shares of the Company's common stock for
net proceeds of $637,050. The remaining funds were provided by the issuance of
$1,239,000 aggregate principal amount of term notes which bear interest at 2%
per month to certain of the Company's shareholders and directors.
Additionally, two employees of McInnes received options to purchase 110,333
shares of Centrum's common stock for $.64 per share in exchange for certain
options to purchase McInnes stock.
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Centrum's management has been exploring other potential acquisitions of
manufacturing companies consistent with its long-term strategy.
History of Acquisitions - Discontinued Operations
In March 1989, Centrum formed a wholly-owned subsidiary known as J.R.'s
Marketplace, Inc. ("JR's"), which owned and operated a retail supermarket
located in Middletown, Ohio. The assets were purchased from Cardinal Foods,
Inc. on April 3, 1989. Due to negative economic changes in Middletown and
increased competition, JR's did not generate sufficient cash flow to cover
operations and expenses. In May 1991, Centrum sold all of JR's assets to
Cardinal Foods, Inc. and JR's ceased to do business.
In May 1991, a wholly-owned subsidiary, Acme Quality Products, Inc. ("Acme"),
was incorporated under the laws of Delaware. Such subsidiary purchased the
tire hardware division of Acme Quality Products, Inc., a Michigan corporation.
The assets were purchased for cash, notes and the assumption of liabilities
aggregating approximately $3.5 million. The assets acquired included the
machinery and equipment used in the manufacture of tire hardware for the
automotive aftermarket. Primary products included tire gauges, tire valves,
valve extensions, fitting chucks and tire repair products. On July 31, 1992,
Acme voluntarily surrendered its assets to the secured creditor and ceased
operations.
(b) Financial Information about Industry Segments
Information relating to the amounts of revenue, operating profit or loss and
identifiable assets attributable to each of the Company's industry segments for
1994-1996 is included in Note 13 to the Consolidated Financial Statements.
(c) Narrative Description of the Business
Oil and Gas
LaSalle is engaged in the Techno-Chatham Project on eight of its 308.5 acres
under lease in Medina County, in Northeastern Ohio. This waterflood project
involves four injection wells and four recovery wells. As of this date, the
project has not progressed beyond the pilot stage. LaSalle has no full-time
employees.
During 1994, due to continued uncertainties regarding the timing of future
commercial production and potential future cash flows, management determined
that the aforementioned factors have resulted in economic impairment. As a
result, management recorded a $240,338 provision to write the properties down
to their estimated fair market value.
Motor Production Systems
Micafil designs and manufactures armature and stator winding machines and
complete production systems for small fractional horsepower electric motors
used primarily in the automotive and consumer durable goods markets. Micafil's
sales are made directly to the end users of the products. In addition to the
sale of machines and machining lines, revenue is also generated from rebuilding
and retrofitting existing machines and selling replacement parts. Micafil's
business is not dependent on any single customer, although Micafil services a
relatively small number of customers in a given year, only some of which may
place orders in any year.
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The material used in the production process generally consists of steel and
aluminum and purchased electrical and mechanical components such as valves,
cylinders and motors. Micafil has local sources for its production material
and there is ready availability for all components although some items require
longer lead time due to machining or special order items.
Micafil is one of four major suppliers of small fractional horsepower motor
equipment in the world. No single competitor has a dominant position.
Competition is based upon product performance, price, delivery time, and local
plant preference. Management believes that Micafil has a strong reputation for
product performance but in some cases is at a competitive disadvantage in terms
of pricing due to the high quality of product produced compared to its
competitors for the same or similar applications.
As of May 31, 1996, the backlog in firm orders was valued at approximately $6.2
million, and production for all such orders is current. This backlog amount
represents a 188% increase from the backlog as of May 31, 1995 of approximately
$3.2 million.
At March 31, 1996, Micafil had 47 employees.
Material Handling Systems
AH is a full service provider of material handling systems and components to
companies with warehouse and distribution facilities. AH designs, supplies and
installs complete material handling systems directly to end users and original
equipment manufacturers. AH also sells material handling components through
its general products sales force, which includes catalog sales.
AH's principal market is the automotive aftermarket, although approximately 45%
of new business comes from new markets such as hardware, office products,
candy, tobacco, lawn and garden, catalog fulfillment and consumer electronics.
AH has multiple customers, many of which provide repeat business. During
fiscal 1996 and 1995, AH's sales to a customer in the automotive aftermarket
contributed approximately 13% and 12% of AH's sales, respectively. During
fiscal 1995, AH's sales to a customer in the sporting goods industry
contributed 12% of AH's sales. Loss of any one or a few customers may have a
significant impact on AH's results of operations.
Raw materials are purchased to manufacture mezzanines and consist mainly of raw
steel. Other material handling products, such as shelving, rack and conveyor,
are purchased from multiple suppliers. Raw materials and material handling
products are readily available from many different suppliers.
The industry and AH have minimal working capital requirements due to the large
amount of revenues derived from drop shipped goods. Generally, all goods drop
shipped are special orders enabling AH to maintain minimal inventory levels and
still meet customer demand. AH does not provide extended payment terms to
customers and sales invoice terms are generally net ten days.
The material handling equipment industry competes primarily on price, product
performance guarantees and the extent of services which can be provided.
Management believes that AH has a reputation for leadership in facilities
planning and system design, inventory analysis and determination of equipment
needs, procurement and installation of equipment, and coordinated relocation of
customer inventory. There are few direct
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competitors of AH which provide the turnkey service provided by AH.
Competition is primarily in the individual phases of the work performed by AH.
For example, a competitor may provide construction and installation services or
design services, but few competitors provide the range of services provided by
AH. The competitors of AH compete primarily on price.
Because of its expertise, guarantee of product performance and its commitment
to service, AH has a premier reputation as a leader in serving the automotive
aftermarket industry and is known for its ability to sustain a high level of
customer satisfaction. AH's strategy for growth is to pursue market expansion
in those market areas where AH's expertise can command a premium margin.
As of May 31, 1996, the backlog of firm orders is valued at approximately $6.2
million, and production for all such orders is current. This backlog
represents a 5% increase from the backlog as of May 31, 1995 of approximately
$5.9 million.
At March 31, 1996, AH had 87 employees.
Metal Forming Operations
On March 8, 1996, Centrum acquired all of the outstanding common stock of
McInnes, a Pennsylvania corporation for approximately $12.3 million through a
subsidiary merger. McInnes, headquartered in Corry, Pennsylvania, is comprised
of three distinct business units, two of which operate under the tradenames
McInnes Steel Company ("MSC") and McInnes Rolled Rings ("MRR"). The third
business unit, Erie Bronze and Aluminum Company ("EBA"), and Eballoy Glass
Products Company ("Eballoy"), whose operations are located in Erie,
Pennsylvania, are wholly-owned subsidiaries of McInnes Services, Inc.
Approximately 85% of the Metal Forming Operations' sales are made domestically.
MSC, which accounts for approximately 60% of the Metal Forming Operations'
sales, is a leading supplier of open die steel forgings. Major markets served
by MSC include power generation, compressor, and miscellaneous commercial
forgings. A majority of MSC's sales are made to a small number of customers
including General Electric and Westinghouse. Loss of either of these customers
could have a significant impact on MSC's results of operations. Approximately
one-half to three-fourths of MSC's customers provide repeat business. Sales
are made through MSC's direct sales force. MSC generally enters into fixed
price transactions with its customers using "cost plus" pricing procedures
based on MSC's estimated manufacturing costs plus a markup which is designed to
cover administrative costs and provide a profit margin. Because of this
arrangement, MSC is subject to both positive and negative exposure relative to
significant fluctuations in the price of steel.
MRR, located in Erie, Pennsylvania, was established in 1992 upon the
construction of an $8 million state-of-the-art, fully automated seamless ring
rolling mill and accounts for approximately 20 - 25% of the Metal Forming
Operations' sales. In addition, MRR is currently in the process of expanding
its operations to include heat treating. It is expected that gross margins
will improve as MRR will be able to eliminate certain services currently
performed by outside processors. MRR's customers include various bearing and
special machine manufacturers.
EBA, located in Erie Pennsylvania, accounts for approximately 15 - 20% of the
Metal Forming Operations' sales and is a leading producer of nonferrous
castings for the glass container, and pump and valve industries, as well
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as for a variety of other commercial applications. EBA is capable of producing
castings ranging in a size from one ounce to 1,000 pounds in either bronze or
aluminum. Eballoy produces finished machined components for EBA's sales to the
glass container industry.
The primary raw material used by the group consists of steel, which is
purchased from both regional and national suppliers. Orders are placed with
these suppliers for both stock material and to satisfy specific customer
requirements. There are currently no long-term contracts for the purchase of
steel.
McInnes is required to maintain an inventory of stock materials due to the
variety of its products and customer demands regarding lead times.
As of May 31, 1996, the backlog in firm orders of the Metal Forming Operations
was valued at approximately $16 million and production for all such orders is
current.
At March 31, 1996, McInnes had 300 employees. Approximately 125 employees at
MSC are represented by a collectively bargained agreement which expires on
October 1, 1997. Approximately 55 employees at EBA are represented by a
collectively bargained agreement which expires on August 1, 1997.
Approximately 8 employees at Eballoy are represented by a collectively
bargained agreement which expires on October 2, 1996. Management believes that
it has good relations with its employees.
(d) Compliance with Environmental Regulations
The Company's continuing compliance with existing federal, state and local
provisions dealing with the protection of the environment is not expected to
have a material effect upon the Company's capital expenditures, earnings,
competitive position or liquidity.
EBA is a direct defendant in two governmental cost recovery actions and other
related private party actions at a waste disposal site. With regard to the
most significant cost recovery action, EBA has negotiated a settlement which
has been approved in federal court. In addition, EBA and other parties are
responsible for performing certain cleanup work at the site pursuant to a
government order.
Private party suits and actual cleanup costs in excess of governmental
estimates can affect the reliability of the Company's loss estimates. In
addition, unasserted claims are not reflected in the Company's cost estimates.
Pursuant to the environmental statutes, the Company may be found jointly and
severally liable to the government for cleanup costs; however, management
believes that the current status of government settlements and group cleanup
participation at the site indicates that the liability will be shared by
responsible parties. Currently, there are at least 14 parties participating in
various settlements of the cost recovery actions, and 18 parties participating
in a pro rata cost sharing arrangement with respect to the site cleanup work.
The Company has negotiated an insurance settlement which requires the carrier
to reimburse the Company for site expenses, subject to a ceiling. At March 31,
1996, the Company has recorded liabilities of $695,800, of which $350,000 is
recorded as a current liability. At March 31, 1996, the Company has recorded a
receivable from its insurance carrier which is included in current assets.
Funds are expected to be paid over approximately three years. The total
anticipated site costs and private suits are not expected to materially exceed
the recorded accruals and insurance settlement.
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ITEM 2. PROPERTIES
Centrum's principal facilities are set forth in the table below:
<TABLE>
<CAPTION>
Location Use Size Leased/Owned
- -------- --- ---- ------------
<S> <C> <C> <C>
CORPORATE OFFICES
Holland, Ohio Corporate Office 400 Sq. Feet Leased
MATERIAL HANDLING SYSTEMS
Cleveland, Ohio Administration/Sales Office 13,000 Sq. Feet Leased (1)
Production/Warehousing 27,000 Sq. Feet Leased (1)
Cleveland, Ohio Warehousing 1,000 Sq. Feet Leased
Cleveland, Ohio Warehousing 10,000 Sq. Feet Leased
MOTOR PRODUCTION SYSTEMS
Englewood, Ohio Administration/Sales Office 10,000 Sq. Feet Owned
Production/Warehousing 33,000 Sq. Feet Owned
OIL AND GAS
Medina County, Ohio Oil & Gas Exploration 308.5 acres Leased (2)
Metal Forming Operations
Corry, Pennsylvania Administration/Sales Office
Production/Warehousing 180,000 Sq. Feet Owned
Fairview, Pennsylvania Administration/Sales Office
Production/Warehousing 60,000 Sq. Feet Owned
Erie, Pennsylvania Administration/Sales Office
Production/Warehousing 49,000 Sq. Feet Owned
Erie, Pennsylvania Production 11,000 Sq. Feet Leased
</TABLE>
(1) In February 1996, AH exercised an option to purchase this space for
approximately $1,150,000. The terms of this deal are currently being
negotiated.
(2) Represents mineral rights.
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ITEM 3. LEGAL PROCEEDINGS
The Company's continuing compliance with existing federal, state and local
provisions dealing with the protection of the environment is not expected to
have a material effect upon the Company's capital expenditures, earnings,
competitive position or liquidity.
EBA is a direct defendant in two governmental cost recovery actions and other
related private party actions at a waste disposal site. With regard to the
most significant cost recovery action, EBA has negotiated a settlement which
has been approved in federal court. In addition, EBA and other parties are
responsible for performing certain cleanup work at the site pursuant to a
government order.
Private party suits and actual cleanup costs in excess of governmental
estimates can affect the reliability of the Company's loss estimates. In
addition, unasserted claims are not reflected in the Company's cost estimates.
Pursuant to the environmental statutes, the Company may be found jointly and
severally liable to the government for cleanup costs; however, management
believes that the current status of government settlements and group cleanup
participation at the site indicates that the liability will be shared by
responsible parties. Currently, there are at least 14 parties participating in
various settlements of the cost recovery actions, and 18 parties participating
in a pro rata cost sharing arrangement with respect to the site cleanup work.
The Company has negotiated an insurance settlement which requires the carrier
to reimburse the Company for site expenses, subject to a ceiling. At March 31,
1996, the Company has recorded liabilities of $695,800, of which $350,000 is
recorded as a current liability. At March 31, 1996, the Company has recorded a
receivable from its insurance carrier which is included in current assets.
Funds are expected to be paid over approximately three years. The total
anticipated site costs and private suits are not expected to materially exceed
the recorded accruals and insurance settlement.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
This item is not applicable.
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PART II
ITEM 5. MARKET FOR CENTRUM'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
Centrum's common stock was quoted on the National Association of Securities
Dealers Automatic Quotation System (NASDAQ) (Symbol-CIII) for the period April
2, 1981 through May 1992. Centrum was delisted from the NASDAQ in May 1992,
because it did not maintain net worth of $3 million, as required by NASDAQ
rules which became effective in early 1992. Stock trades between May 1992 and
September 1995 were primarily made through Continental Capital, Inc. generally
at a quoted price of between $0.75 and $1 per share. Continental Capital, Inc.
is a shareholder of the Company and its Chairman and Chief Executive Officer
was, from 1988 to 1995, Centrum's Chairman of the Board and Chief Executive
Officer and, since June 1995, was a Director and Vice President of Centrum and,
since December 1995, is a Director, Vice President and Secretary of Centrum.
See Item 10 "Directors and Executive Officers of Centrum," and Item 12
"Security Ownership of Certain Beneficial Owners and Management." Since
September 1995, the Company has been quoted on the Over-the-Counter market
(OTC) on what is called the Bulletin Board. The market maker for Centrum is
Hill Thompson, located in New York City. The trading symbol remains CIII.
Since becoming quoted on the Bulletin Board, there have been trades ranging
from a low of $.25 per share in September 1995 to a high of $2.25 in March
1996. Approximately 58,600 shares of common stock have been traded on the
Bulletin Board. As of March 31, 1996 and 1995, there were approximately 1,000
shareholders of record. Shareholders are entitled to receive dividends when
and as declared by the Board of Directors. However, Centrum has never paid a
dividend, and intends to retain any earnings to finance the development of its
business and, accordingly, does not anticipate payment of any dividends in the
foreseeable future. Furthermore, any proposed dividends must be approved, in
advance, by both Huntington National Bank, the lender for Centrum's bank line
of credit, and the holders of the 11% convertible, unsecured notes payable.
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ITEM 6. SELECTED FINANCIAL DATA
The following five-year selected financial data should be read in conjunction
with the Consolidated Financial Statements that appear elsewhere in this
report.
<TABLE>
<CAPTION>
As of and for the Years Ended March 31,
---------------------------------------
1996 1995 1994 1993 1992
SUMMARY OF OPERATIONS:
<S> <C> <C> <C> <C> <C>
Net sales $27,525,702 $18,292,696 $ 8,760,667
Other income (expense) (402,520) (270,912) (483,599) $ (132,258) $ (230,008)
Income (loss) from continuing
operations before income taxes
and extraordinary items 1,063,054 386,927 (1,112,897) (436,780) (372,780)
Provision for income taxes 257,814 223,679
----------- ----------- ----------- ---------- -----------
Income (loss) from continuing
operations 805,240 163,248 (1,112,897) (436,780) (372,780)
Loss from discontinued
operations (12,060) (635,417)
Extraordinary item 32,017
----------- ----------- ----------- ---------- -----------
Net income (loss) $ 805,240 $ 163,248 $(1,112,897) $ (416,823) $(1,008,197)
=========== =========== =========== ========== ===========
PER SHARE DATA:
Income (loss) from continuing
operations $ .13 $ .03 $ (.26) $ (.21) $ (.20)
Loss from discontinued
operations (.01) (.33)
Extraordinary item .02
----------- ----------- ----------- ---------- -----------
Net income (loss) $ .13 $ .03 $ (.26) $ (.20) $ (.53)
=========== =========== =========== ========== ===========
FINANCIAL POSITION:
Current assets $23,195,165 $ 5,393,369 $ 3,450,374 $ 231,910 $ 24,632
Current liabilities 24,219,677 4,432,101 5,810,033 508,600 823,502
Working capital (deficiency) (1,024,512) 961,268 (2,359,659) (276,690) (798,870)
Total assets 40,611,748 9,547,336 7,941,039 697,504 557,683
Long-term liabilities 12,809,079 3,609,487 1,035,499 325,000 7,954
Shareholders' equity
(deficiency) 3,582,992 1,505,748 1,095,507 (136,096) (273,773)
OTHER DATA:
Common shares and common
share equivalents:
Weighted average
outstanding during the year 6,086,981 5,850,005 4,280,741 2,078,658 1,898,102
Outstanding at year end 6,170,860 5,745,360 5,473,056 2,611,436 1,898,102
</TABLE>
12
<PAGE> 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The discussion and analysis of Centrum Industries, Inc.'s financial condition
and results of operations should be read together with the consolidated
financial statements and notes thereto which begin on page 22.
OVERVIEW
Centrum is a publicly traded holding company that acquires and operates
companies that have strong niche positions in their industries. During 1996,
Centrum completed its third and largest acquisition in three years. As a
holding company, the Company's long-range strategy is to own and acquire
control of companies in basic manufacturing industries located primarily in the
Great Lakes region, which the Company can increase in value in the public
market. All of the Company's present manufacturing subsidiaries were acquired
subsequent to April 1993.
RESULTS OF OPERATIONS
The Company's operations subsequent to March 8, 1996, have been classified into
five business segments: material handling systems, motor production systems,
metal forming operations, oil and gas, and corporate office. The material
handling systems segment was established with the acquisition of American
Handling, Inc. ("AH") on September 2, 1993, and consists of the design,
manufacture and installation of material handling equipment for warehouse and
distribution applications. The motor production system segment was established
with the acquisition of Micafil, Inc. ("Micafil") on May 17, 1993, and consists
of the manufacture of armature winding machines and complete production systems
for numerous complex manufacturing processes. The metal forming operations
segment was established on March 8, 1996 with the acquisition of McInnes Steel
Company, and consists of open die forging, bronze and aluminum casting and
rolled ring operations. The oil and gas segment was established in August 1990
with the purchase of a leasehold interests and miscellaneous equipment to
explore for oil through a shallow sand waterflood project on eight acres of
land. The Corporate office segment does not generate sales but functions to
oversee the operating divisions and pursue future acquisitions.
Year ended March 31, 1996 compared to March 31, 1995.
Consolidated results
Net sales for 1996 increased by $9.2 million or 50% to $27.5 million. The
primary reason for the increase in sales was a $6.5 million increase at the
material handling segment. In addition, consolidated sales for 1996 include
sales by the metal forming operations segment of $2.5 million for the period
from March 8, 1996 (the date Centrum acquired McInnes) to March 31, 1996.
Gross margins of $7.2 million increased by $2.4 million from the prior year and
increased slightly to 26.2% from 26.1% of sales. Selling, general and
administrative expenses increased by $1.7 million to $5.8 million, reflecting
the increased level of operations, but decreased as a percent of sales from
22.5% for fiscal 1995 to 20.9% for the current year. Interest expense
increased by $.2 million to $.5 million primarily reflecting the increased
level of debt required to fund the McInnes acquisition. The 1996 consolidated
income tax provision of $258,000 increased over the prior year's provision of
$224,000. The slight increase was due to a higher current provision,
reflecting the improved profitability of the consolidated group, which was
somewhat offset by a deferred income tax benefit of $191,000. During 1996, net
13
<PAGE> 14
operating losses of approximately $820,000 were used to offset income taxes
payable. However, in accordance with Statement of Financial Standards No. 109,
"Accounting for Income Taxes" (FAS 109), utilization of net operation losses
(NOLs) relating to net operating losses of AH and Micafil which were fully
reserved at the time they were acquired resulted in a $192,000 decrease to
goodwill and other intangibles, rather than as a reduction of income tax
expense. See Note 9 to the Consolidated Financial Statements for further
information.
Results for each of the individual segments are as follows.
Material Handling Systems
Revenues for 1996 were $19.5 million, which was an increase of $6.5 million or
50% of the revenue generated in 1995. The primary reasons for the increase was
the continued repositioning of AH into leading-edge high tech systems
integration markets and the ongoing strength of the manufacturing sector
economies. Gross margins of $5.1 million, or 26.3% of sales for 1996,
reflected a slight decrease over the prior year's margin of 26.9%. Selling,
general and administrative expenses for 1996 were $3.7 million, which is an
increase of $1.0 million over 1995. The increase in selling, general and
administrative expenses is primarily due to increased wages, reflecting AH's
expanding operations, and increased bonus expense as a result of improved
profitability. As a percent of sales, the 1996 selling, general and
administrative expenses decreased to 19.1% of sales from 20.8% in 1995. The
decrease in 1996 is due to an increase in sales volume which covered a greater
proportion of fixed expenses. Interest expense decreased from $78,000 in 1995
to $49,000 in 1996 as a result of decreased borrowings.
Motor Production Systems
Revenues for 1996 were $5.5 million, which was an increase of $.2 million from
the prior year. The primary reason for the increase is the continued
improvement in the appliance and power tool markets. Gross margins of $1.4
million, or 24.9% of sales improved over the prior year's gross margin of
24.2%. The gross margin improvement is due to Micafil accepting a larger
proportion of higher margin contracts as a result of increased demand within
the industry. Selling, general and administrative expenses for 1996 were $.9
million or $.2 million higher than the previous year. As a percent of sales,
selling, general and administrative expenses increased from 16.1% in 1995 to
16.5% in 1996. The increase was primarily due to an increase in the number of
administrative personnel.
Oil and Gas
The oil and gas segment recorded a loss of $32,500 in 1996 as compared to a
loss of $26,500 in 1995. No significant improvements were made to the
properties during 1996 or 1995.
Corporate Office
During 1996, the corporate office recorded general and administrative expenses
of $.6 million, as compared to $.5 million in the prior year. The increase was
the result of an increase in payroll expense of $.2 million, primarily related
to bonuses and the additional wages of an executive officer appointed in 1996,
which was partially offset by a $.1 million decrease in expenses related to
acquisitions efforts which were not successful. Interest expense for 1996 was
$242,000 as compared to $130,000 in 1995. The increase in interest expense was
due to debt incurred primarily in connection with the acquisition of McInnes.
14
<PAGE> 15
YEAR ENDED MARCH 31, 1995 COMPARED TO MARCH 31, 1994
Consolidated results
Net sales for 1995 increased by $9.5 million or 109% to $18.3 million. The
reason for the increase is primarily due to 1995 being a full year of
operations whereas 1994 included the results of the material handling segment
and the motor production systems segment for seven and 10 1/2 months in 1994,
respectively. Gross margins of $4.8 million increased by $2.7 million from the
prior year and were 26.1% of sales as compared to 23.9% in 1994. Selling,
general and administrative expenses increased by $1.4 million to $4.1 million,
reflecting the increased level of operations, but decreased as a percent of
sales from 31.1% for fiscal 1994 to 22.5% for 1995. The improvements in gross
margin and selling, general and administrative expenses were primarily due to
cost cutting measures which were implemented in 1994 upon the acquisition of AH
and Micafil and the increase in sales, which covered a larger volume of fixed
overhead costs. Interest expense increased by $.1 million to $.3 million
primarily due to debt issued in connection with the Micafil acquisition being
outstanding for a full year. The income tax provision for 1995 was $224,000
and reflects the increased profitability of AH and Micafil. None of this
amount was payable due to the availability of NOLs at AH and Micafil. NOLs at
AH and Micafil represent preacquisition NOLs which were fully reserved at the
time AH and Micafil were acquired by Centrum. In accordance with FAS 109,
utilization of these preacquisition NOLs results in a reduction of goodwill and
other intangible assets, rather than a reduction of income tax expense. See
Note 9 to the Consolidated Financial Statements.
Results for each of the individual segments are as follows.
Material Handling Systems
Revenues for 1995 were $13.0 million, which was an increase of $7.0 million or
117% of the revenue generated in 1994. The primary reason for the increase is
due to 1995 being a full year of operations, as compared to approximately seven
months for fiscal 1994. Gross margins of $3.5 million, or 26.9% of sales for
1995 reflected a slight improvement over the prior year's margin of 26.7%.
Selling, general and administrative expenses for 1995 were $2.7 million, which
is an increase of $1.2 million over 1994. The increase in selling, general and
administrative expenses is primarily due to the current year reflecting a full
year of operations as compared to approximately seven months for 1994. As a
percent of sales, the 1995 selling, general and administrative expenses
decreased to 20.8% of sales from 25.0% in 1994. The decrease in 1995 is due to
an increase in sales volume which covered a greater proportion of fixed
selling, general, and administrative expenses. Interest expense increased from
$53,000 in 1994, to $78,000 in 1995 which represents a full year of interest
expense during 1995, as compared to approximately seven months in 1994 and is
somewhat offset by an overall reduction in the level of debt outstanding at AH.
Motor Production Systems
Revenues for 1995 were $5.3 million, which was an increase of $2.6 million from
the prior year. The primary reason for the increase is the resurgence of the
automotive industry, which is the segment's primary market, and continued
improvements in the appliance and power tool markets. Additionally, results
for 1995 represent a full year of operations, whereas 1994 represents only 10
1/2 months. Gross margins of $1.3 million or 24.2% of sales improved over the
prior year's gross margin percent of 18.5%. The gross margin improvement is
due to the greater volume of sales, which absorbed a larger amount of fixed
overhead and larger and more profitable contracts. Selling, general and
administrative expenses for 1995 were $.9 million or $.2 million higher than
the
15
<PAGE> 16
previous year. As a percent of sales, selling, general and administrative
expenses decreased from 25.9% in 1994 to 17.0% in 1995. The decrease
represents both the reduction in staffing following Centrum's acquisition of
Micafil and the increase in sales volume which covered a greater proportion of
fixed selling, general and administrative expenses. Interest expense increased
from $113,000 in 1994 to $123,000 in 1995 due to the $1.7 million in debt used
to finance the acquisition of Micafil being outstanding for all of 1995 as
compared to 10 1/2 months in 1994.
Oil and Gas
The oil and gas segment recorded a loss of $26,500 in 1995 as compared to a
loss of $272,000 in 1994. During 1994, as a result of continued uncertainties
regarding the timing of future commercial production and potential future cash
flows, management determined that the aforementioned factors resulted in
economic impairment and recorded a $240,000 provision to write the oil and gas
properties down to approximately $89,000, which management believes to be their
fair market value. No significant improvements were made to the properties
during 1995 or 1994.
Corporate Office
During 1995 and 1994, the corporate office recorded general and administrative
expenses of $.5 million. Interest expense for 1995 and 1994 was $130,000 and
$72,000, respectively. The increase in interest expense represents a higher
level of debt outstanding during 1995, as compared to 1994.
LIQUIDITY AND CAPITAL RESOURCES
CASH PROVIDED BY OPERATING ACTIVITIES
Cash provided by operating activities for the year ended March 31, 1996 was
$510,000, which was an improvement from cash used for operating activities of
$131,000 and $351,000 for the years ended March 31, 1995 and 1994,
respectively. The improvement in operating cash flow reflects the increasing
profitability of the consolidated group. During 1996 and 1995, the primary use
of cash for operating activities was a $2.2 million and $1.8 million increase,
respectively, in accounts receivable, due to the increasing fourth quarter
revenues at AH and Micafil. The increases in accounts receivable were
partially offset by increases in accounts payable of $1.7 million and $.7
million at March 31, 1996 and 1995, respectively, which reflects the increased
level of operations at the operating subsidiaries. Net income for 1996, 1995
and 1994 included depreciation and amortization expense of $314,000, $260,000
and $161,000, respectively, and the recording of a non-cash income tax
provision of $191,000 and $224,000, during 1996 and 1995, respectively, for the
utilization of fully reserved, preacquisition net operating losses at AH and
Micafil. During 1994, a non-cash provision of $240,000 was recorded to write
down the assets at LaSalle. See Notes 4 and 9 to the Consolidated Financial
Statements.
CASH FLOWS FROM FINANCING AND INVESTING ACTIVITIES
To meet operating expenses and to finance acquisitions, during the period from
1994 through 1996, Centrum relied upon a combination of net proceeds from new
capital and debt. During 1996, Centrum initiated a Private Placement Offering
("Offering") for 2.4 million shares of its common stock. The stock is being
offered in Units of 12,000 shares at a cost of $18,000 per Unit. Through March
31, 1996, 485,500 shares of common stock have been sold for $637,050, which is
net of $91,200 in issuance costs and expenses. The Units are being
16
<PAGE> 17
offered by Continental Capital, Inc. See Item 13, "Certain Relationships and
Related Transactions." During 1995, proceeds of $247,000 were generated from
the sale of stock to new and existing shareholders.
Centrum also obtained funds for operating expenses from the proceeds of several
private placements of debt. Beginning in March 1993, Centrum has offered up to
an aggregate amount of $2 million of debentures with common stock warrants for
a term of one year from date of sale. Centrum has the option to extend the
renewal date for one year periods for a maximum of three years. The attached
warrant permits the holder to purchase Centrum stock at $1 per share. Each
$10,000 of debt has a warrant for 1,000 shares while the debt is outstanding.
Under this private placement, $25,000 principal amount of debentures were sold
in 1996, $116,000 principal amount of debentures were sold in 1995, and
$493,000 were sold in 1994. During 1996, $75,000 of the debentures previously
sold in this private placement were repaid. Beginning in January 1995, Centrum
has offered unsecured five year term notes with attached warrants. The notes
bear interest at prime plus .5%. The warrants allow the note holder to
purchase 20,000 shares of the Company's common stock for each $50,000 of notes
held at a purchase price of $1 per share. There were $550,000 of notes sold in
1996 and $650,000 in 1995. The proceeds from these sales were used to fund
corporate office operations. During 1996, $83,000 of these notes were repaid.
No warrants were exercised in 1996, 1995, or 1994. Subsequent to December
1995, the debt private placements were terminated.
The acquisition of McInnes was primarily financed in the form of new debt
agreements and proceeds from the sale of the Company's common stock. The first
debt agreement consists of a promissory note issued to a commercial bank for
$2,850,000 payable in monthly installments at 1.25% above the prime rate and a
line-of-credit for the lesser of $15.5 million or "borrowing base," as defined
in the agreement. As of March 31, 1996, approximately $13.2 million in total
loans and commitments was available of which the Company had borrowed
$7,886,486 and had stand-by letters of credit issued of approximately $4.6
million. The second debt agreement is a Note and Warrant Purchase Agreement
which provides for $2.5 million aggregate principal amount of 11% convertible
debt with warrants for the purchase of 1,250,000 shares of the Company's common
stock for $2 per share. Additional funds to finance the acquisition were
obtained through the sale of 485,500 shares of the Company's common stock for
net proceeds of $637,050. The remaining funds were provided by the issuance of
$1,239,000 aggregate principal amount of term notes which bear interest at 2%
per month to certain of the Company's shareholders and directors and are to be
repaid by August 1996 from the anticipated proceeds of additional sales from
the Offering. The Company has an option to extend repayment on these notes for
one six month period.
The acquisition of AH was made through the issuance of common stock. At March
31, 1995, AH had borrowings of $285,000 under a secured line of credit which
permitted borrowings of up to a maximum of either $700,000 or a borrowing base,
as defined in the loan agreement. This agreement expired in September 1995.
AH also has $350,000 of term debt borrowings outstanding as of March 31, 1996
and 1995. These notes are for a term of one year and AH has the option to
extend the notes for an additional year.
The acquisition of Micafil was made through the issuance of two term notes to
the seller. These term notes were for a total of $1,750,000 and provided for
principal and interest payments to be made for a five year period. During
1995, the Company repaid the remainder of the $100,000 note and reached an
agreement to restructure the $1,650,000 note. See Note 7 to the Consolidated
Financial Statements.
17
<PAGE> 18
As further described under Item 1, LaSalle acquired a leasehold interest for
all mineral rights. LaSalle acquired the funds to pay the purchase price of
$78,691 for the leasehold project and the equipment purchase in the amount of
$21,309 from an investment by Centrum. Centrum's management believes that
continuance of the pilot program requires minimal additional operating
expenditures, and management does not anticipate that any material capital
expenditures will be required to determine whether sufficient oil can be
recovered to be marketable. LaSalle's ability to generate revenues is
dependent upon the recovery of oil reserves which have not been proven to date.
As of March 31, 1996, the Company has executed an option to purchase certain
warehousing and office space now being leased by AH for approximately
$1,150,000. The terms of this deal are still being negotiated. Centrum has no
other material commitments for capital expenditures. Additions to property,
plant and equipment were approximately $526,000 in 1996, $99,000 in 1995 and
$47,000 in 1994.
The financing provided by the commercial bank (Bank) for the acquisition (Bank
Loan) has been secured by substantially all the real and personal property of
Centrum and its direct and indirect subsidiaries and contains various
financial, operational and reporting covenants, including a prohibition on the
Company from incurring new secured debt or new unsecured debt in excess of
certain thresholds or from making any business acquisitions, unless a waiver is
first obtained from the Bank. The Bank permits certain management fees and
advances to be paid by certain of the Company's subsidiaries to Centrum, and
Centrum will use these advances primarily for payment of principal and interest
expense and for working capital purposes. Management believes that such
management fees and advances are permitted in amounts adequate to service
Centrum's financial obligations.
The 11% convertible subordinated debt (Notes) are convertible at any time at
the option of the holder (Holders) to shares of the Company's common stock at a
price of $2.00 per share. The warrants are exercisable at an initial exercise
price of $2.00 per share, subject to various anti-dilution adjustments
affecting the exercise price and/or the number of shares subject to the
warrants. The Notes are presently secured by the guarantees of two of the
Company's subsidiaries, American Handling, Inc. and Micafil, Inc., and the
Notes have been subordinated to the Bank Loan. The Notes agreement contains
various financial, operational, and reporting covenants and requirements
including a requirement that each of the Holders must approve certain financial
and operational transactions of the Company, including the incurrence of new
secured or unsecured debt, with certain exceptions, and any business
acquisitions. Additionally, the Company may not pay dividends or issue
additional shares of common stock (with certain exceptions), without the prior
approval of the Holders. The Company has also entered into an Equity Holders
Agreement, in which the Company has agreed to use its best efforts to cause two
persons designated by the Holders to be nominated to the Company's Board of
Directors, if requested by the Holders.
At March 31, 1996, the Company has $11.2 million in NOLs available which would
reduce income tax payable in future years. However, there are uncertainties
related to both the amount and ultimate realization of the NOLs. See Note 9 to
the Consolidated Financial Statements.
The Company is involved in routine litigation and various legal efforts
incidental to the normal operations of its business. In management's opinion,
none of these matters will have a materially adverse effects on the Company's
liquidity or results of operations. See also "Environmental Matters," below.
18
<PAGE> 19
Centrum management believes that sufficient funds for future operations and
acquisitions can be raised from persons who are accredited investors in
accordance with the private offering requirements of federal and state
securities laws and through funds available under the line of credit agreement
and through cash flows generated by the operating subsidiaries.
ENVIRONMENTAL MATTERS
The Company's continuing compliance with existing federal, state and local
provisions dealing with the protection of the environment is not expected to
have a material effect upon the Company's capital expenditures, earnings,
competitive position or liquidity.
EBA is a direct defendant in two governmental cost recovery actions and other
related private party actions at a waste disposal site. With regard to the
most significant cost recovery action, EBA has negotiated a settlement which
has been approved in federal court. In addition, EBA and other parties are
responsible for performing certain cleanup work at the site pursuant to a
government order.
Private party suits and actual cleanup costs in excess of governmental
estimates can affect the reliability of the Company's loss estimates. In
addition, unasserted claims are not reflected in the Company's cost estimates.
Pursuant to the environmental statutes, the Company may be found jointly and
severally liable to the government for cleanup costs; however, management
believes that the current status of government settlements and group cleanup
participation at the site indicates that the liability will be shared by
responsible parties. Currently, there are at least 14 parties participating in
various settlements of the cost recovery actions, and 18 parties participating
in a pro rata cost sharing arrangement with respect to the site cleanup work.
The Company has negotiated an insurance settlement which requires the carrier
to reimburse the Company for site expenses, subject to a ceiling. At March 31,
1996, the Company has recorded liabilities of $695,800, of which $350,000 is
recorded as a current liability. At March 31, 1996, the Company has recorded a
receivable from its insurance carrier which is included in current assets.
Funds are expected to be paid over approximately three years. The total
anticipated site costs and private suits are not expected to materially exceed
the recorded accruals and insurance settlement.
OUTLOOK
Operating revenues are expected to increase in 1997 due primarily to the
inclusion of McInnes' results for the full year. Backlogs for the Metal
Forming Operations have increased 29% to $16 million from December 1995 to
April 1996. Sales for this segment are expected to exceed $40 million during
1997. AH has achieved revenue growth of 50% and 29% for 1996 and 1995 (on an
annualized basis), respectively. However, AH may not be able to sustain the
significant revenue gains experienced over the past two years due to general
economic conditions as well as operational constraints. Operations at Micafil
are expected to be strong throughout 1997 given the backlogs which currently
exist. Interest expense for 1997 is expected to increase by approximately $1.4
million to $2 million, assuming consistent interest rates and amounts
outstanding, primarily due to the debt incurred with the acquisition of
McInnes. The Company has bonus programs in place which result in the granting
of 12 1/2% to 25% of each segment's pre tax profit, before intercompany
management charges, which
19
<PAGE> 20
will reduce future profit improvements proportionally. Each segment is
considered to be a separate unit for profit sharing purposes. During 1997,
management will work to improve operating results at its existing subsidiaries
and to integrate the operations of McInnes. In addition, management will
continue to investigate potential acquisitions which operate in niche markets
and have strong barriers to entry.
This annual report on Form 10-K, including "Business" and "Management's
Discussion and Analysis of Results of Operations and Financial Condition,"
contains forward-looking statements within the meaning of the "safe-harbor"
provisions of the Private Securities Litigation Reform Act of 1995. Such
statements are based on management's current expectations and are subject to a
number of factors and uncertainties which could cause actual results to differ
materially from those described in the forward-looking statements. Such
factors and uncertainties include, but are not limited to: the impact of the
level of the Company's indebtedness; the impact of changes in interest rates on
the Company's variable rate borrowings; restrictive covenants contained in the
Company's various debt documents; general economic conditions; the Company's
dependence on a few large customers; price fluctuations in the raw materials
used by the Company, particularly steel; competitive conditions in the
Company's markets; and the impact of federal, state and local environmental
requirements (including the impact of current or future environmental claims
against the Company). As a result, the Company's operating results may
fluctuate, especially when measured on a quarterly basis.
20
<PAGE> 21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
<S> <C>
Index to Financial Statements and Financial Statement Schedules
Financial Statements:
Page
----
Report of Independent Accountants 22
Consolidated Balance Sheet at March 31, 1996 and 1995 23
Consolidated Statement of Operations for the three
years ended March 31, 1996 24
Consolidated Statement of Changes in Shareholders' Equity
for the three years ended March 31, 1996 25
Consolidated Statement of Cash Flows for the
three years ended March 31, 1996 26-27
Notes to Consolidated Financial Statements 28-46
Financial Statement Schedule for the three years ended March 31, 1996
II - Valuation and Qualifying Accounts 47
</TABLE>
All other schedules are omitted because they are not applicable or the required
information is shown in the consolidated financial statements or notes thereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
This item is not applicable.
21
<PAGE> 22
Report of Independent Accountants
To the Board of Directors and Shareholders of
Centrum Industries, Inc.
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Centrum Industries, Inc. and its subsidiaries at March 31, 1996 and
1995, and the results of their operations and their cash flows for each of the
three years in the period ended March 31, 1996, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 2 to the consolidated financial statements, on March 8,
1996, the Company acquired McInnes Steel Company.
PRICE WATERHOUSE LLP
Toledo, Ohio
June 7, 1996
22
<PAGE> 23
CENTRUM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31,
1996 1995
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 2,100,749 $ 472,673
Accounts receivable, less allowance for doubtful
accounts of $93,761 and $60,658, respectively 10,979,166 3,273,719
Cost and estimated earnings in excess of
billings on uncompleted contracts 372,699 482,044
Inventories, net 9,395,244 1,111,196
Prepaid expenses and other 347,307 53,737
----------- ----------
Total current assets 23,195,165 5,393,369
----------- ----------
Oil and gas properties 88,908 88,908
----------- ----------
Property, plant and equipment, net 11,062,201 1,121,981
----------- ----------
Other assets:
Deferred income tax benefits 2,066,393
Goodwill, less accumulated amortization of
$404,494 and $286,510, respectively 2,439,616 2,786,891
Debt issuance costs 1,133,412 50,638
Other 626,053 105,549
----------- ----------
Total other assets 6,265,474 2,943,078
----------- ----------
Total assets $40,611,748 $9,547,336
=========== ==========
Liabilities and Shareholders' Equity
Current liabilities:
Bank line of credit $ 7,886,486 $ 285,000
Current portion of long-term debt 2,976,425 186,726
Accounts payable 9,506,022 2,433,680
Accrued employee costs 1,012,655 347,243
Accrued interest 138,055 274,471
Deposits 268,394 289,009
Income taxes payable 251,143
Deferred income taxes 122,974
Other accrued expenses 2,057,523 615,972
----------- ----------
Total current liabilities 24,219,677 4,432,101
----------- ----------
Long-term debt, less current portion 11,982,409 3,609,487
----------- ----------
Other liabilities 826,670
----------- ----------
Commitments and contingent liabilities (Note 10)
Shareholders' equity:
Preferred stock - $.05 par value, 1,000,000 shares
authorized, 70,000 issued and outstanding (liquidation
preference of $10 per share) 3,500 3,500
Common stock - $.05 par value, 15,000,000 shares
authorized, 6,170,860 and 5,745,360 issued and
outstanding at March 31, 1996 and 1995, respectively 308,543 287,268
Additional paid-in capital 5,318,767 4,068,038
Accumulated deficit (2,047,818) (2,853,058)
----------- ----------
Total shareholders' equity 3,582,992 1,505,748
----------- ----------
Total liabilities and shareholders' equity $40,611,748 $9,547,336
=========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
23
<PAGE> 24
CENTRUM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
MARCH 31,
1996 1995 1994
<S> <C> <C> <C>
Net sales $27,525,702 $18,292,696 $ 8,760,667
Cost of goods sold 20,306,567 13,516,489 6,668,265
----------- ----------- -----------
Gross profit 7,219,135 4,776,207 2,092,402
Selling, general and administrative
expenses 5,753,561 4,118,368 2,721,700
----------- ----------- -----------
Operating income (loss) 1,465,574 657,839 (629,298)
----------- ----------- -----------
Other income (expense):
Interest income 18,206 2,638 10,540
Interest expense (515,538) (331,287) (238,047)
Provision for impairment of oil and
gas properties (Note 4) (240,338)
Miscellaneous 94,812 57,737 (15,754)
----------- ----------- -----------
Total other expense (402,520) (270,912) (483,599)
----------- ----------- -----------
Income (loss) before income taxes 1,063,054 386,927 (1,112,897)
----------- ----------- -----------
Provision for income taxes:
Current 448,838
Deferred (191,024) 223,679
----------- ----------- -----------
Total provision for income taxes 257,814 223,679
----------- ----------- -----------
Net income (loss) $ 805,240 $ 163,248 $(1,112,897)
=========== =========== ===========
Net income (loss) per common share: $ .13 $ .03 $ (.26)
=========== =========== ===========
Weighted average number of common
and common equivalent shares 6,243,174 5,850,005 4,280,741
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
24
<PAGE> 25
CENTRUM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
-------------------- --------------------- Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit
<S> <C> <C> <C> <C> <C> <C>
Balance,
March 31, 1993 70,000 $3,500 2,611,436 $130,572 $1,683,741 $(1,903,409)
Issuance of common stock 2,861,620 143,081 2,150,919
Net loss for year (1,112,897)
------ ------ --------- -------- ---------- -----------
Balance,
March 31, 1994 70,000 3,500 5,473,056 273,653 3,834,660 (3,016,306)
Issuance of common stock 272,304 13,615 233,378
Net income for year 163,248
------ ------ --------- -------- ---------- -----------
Balance,
March 31, 1995 70,000 3,500 5,745,360 287,268 4,068,038 (2,853,058)
Purchase of stock (60,000) (3,000) (57,000)
Issuance of common stock 485,500 24,275 612,775
Issuance of warrants 600,000
Issuance of options 94,954
Net income for year 805,240
------ ------ --------- -------- ---------- -----------
Balance,
March 31, 1996 70,000 $3,500 6,170,860 $308,543 $5,318,767 $(2,047,818)
====== ====== ========= ======== ========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
25
<PAGE> 26
CENTRUM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
MARCH 31,
1996 1995 1994
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 805,240 $ 163,248 $(1,112,897)
Adjustments to reconcile net income (loss) to
net cash provided by (used for) operating activities:
Depreciation 157,573 82,276 51,645
Amortization 156,711 177,557 108,953
Deferred income taxes (191,024)
Reduction of goodwill for utilization of
preacquisition net operating loss 190,564 223,679
Provision for impairment of oil and gas properties 240,338
Changes in assets and liabilities that provided
(used) operating cash, net of acquisitions:
Accounts receivable (2,216,194) (1,848,417) 46,922
Costs and estimated earnings in excess
of billings on uncompleted contracts 109,345 67,411 (370,196)
Inventories (111,597) 141,520 (72,754)
Accounts payable 1,664,084 731,367 747,988
Prepaid expenses and other (213,923) (31) 167,202
Accrued expenses and other 159,144 130,188 (158,433)
------------ ----------- -----------
Net cash provided by (used for)
operating activities 509,923 (131,202) (351,232)
------------ ----------- -----------
Cash flows from investing activities:
Purchase of McInnes, net of cash acquired (12,306,627)
Additions to oil and gas properties (8,671)
Purchase of property and equipment (525,940) (98,768) (38,350)
Proceeds from disposal of equipment 10,000
Payment received on note receivable 50,500
Proceeds from sale of marketable equity
securities 34,000
------------ ----------- -----------
Net cash provided by (used for)
investing activities $(12,822,567) $ (64,768) $ 3,479
------------ ----------- -----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
26
<PAGE> 27
CENTRUM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
MARCH 31,
1996 1995 1994
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from issuance of notes payable $ 6,386,136 $ 774,501 $ 565,902
Debt issue costs (884,501)
Repayments of notes payable (339,450) (331,000) (170,189)
Net proceeds (repayments) on short-term debt 7,601,485 (109,000) (125,200)
Proceeds from the issuance of common stock 637,050 246,993
Proceeds from issuance of warrants 600,000
Repurchase of common stock (60,000)
----------- --------- ----------
Net cash provided by financing
activities 13,940,720 581,494 270,513
----------- --------- ----------
Increase (decrease) in cash and cash equivalents 1,628,076 385,524 (77,240)
Cash and cash equivalents at beginning of year 472,673 87,149 164,389
----------- --------- ----------
Cash and cash equivalents at end of year $ 2,100,749 $ 472,673 $ 87,149
=========== ========= ==========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 651,954 $ 282,635 $ 117,036
=========== ========= ==========
Supplemental disclosures of non-cash financing
and investing activities:
Issuance of options to purchase 110,333
shares of common stock at $.64 per share $ 94,954
===========
Issuance of 2,861,620 shares of common
stock in exchange for all of the outstanding
common stock of American Handling, Inc. $2,294,000
==========
Issuance of promissory notes for all of the
outstanding common stock of Micafil, Inc. $1,750,000
==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
27
<PAGE> 28
CENTRUM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Centrum Industries, Inc. (the Company) is a holding company. At March
31, 1996, the Company's subsidiaries included the following companies:
- McInnes Steel Company (McInnes or Metal Forming Operations) -
McInnes, with operating subsidiaries located in Northwestern
Pennsylvania, produces open die steel forgings for the power
generation, compressor and other industrial markets. McInnes also
produces seamless steel rolled rings for bearing and special
machine manufacturers and nonferrous castings for the glass
container manufacturers and pump and valve industries. Sales of
McInnes' products are made to both domestic and international
customers. McInnes was purchased by Centrum on March 8, 1996 (see
Note 2).
- American Handling, Inc. (AH or Material Handling Systems) - AH,
located in Cleveland, Ohio, designs, manufactures and installs
material handling equipment for various domestic manufacturing
companies.
- Micafil, Inc. (Micafil or Motor Production Systems) - Micafil,
located in Dayton, Ohio, manufactures armature winding machines
and completed production systems primarily for domestic customers
in the appliance and automotive industries.
- LaSalle Exploration, Inc. (LaSalle or Oil and Gas) - LaSalle was
formed to explore for oil through a shallow sand waterflood
project on eight acres in Northeastern Ohio.
CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions are eliminated.
USE OF ESTIMATES
The preparation of these financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the consolidated financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments are utilized by the Company to reduce
foreign exchange risks relating to export sales. The Company does not
hold or issue derivative financial instruments for trading purposes.
Gains or losses on contracts designated as hedges for identifiable
foreign currency firm commitments are deferred and included in the
measurement of the related foreign currency transaction.
28
<PAGE> 29
CENTRUM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
At March 31, 1996, the Company had one forward exchange contract to
purchase German marks totaling approximately $362,000. The notional
value of the contract is equal to the sale of inventory, payment for
which is denominated in German marks. The contract expires on May 15,
1996. The counterparties to the Company's derivative financial
instrument contracts are multinational commercial banks or other
financial institutions. Neither the risks of counterparty
nonperformance nor the economic consequences of counterparty
nonperformance associated with these contracts are considered by the
Company to be material.
DEBT ISSUANCE COSTS
Debt issuance costs are deferred and amortized over the life of the
related note utilizing the interest method for debt with scheduled
principal payments, otherwise utilizing the straight-line method over
the life of the debt agreement. Accumulated amortization was $42,033
and $17,132 at March 31, 1996 and 1995, respectively.
ENVIRONMENTAL LIABILITIES AND EXPENDITURES
The Company expenses environmental expenditures related to existing
conditions resulting from past or current operations and from which no
current or future benefit is discernible. The Company determines its
liability on a site-by-site basis and records a liability at the time
when it is probable and can be reasonably estimated. Unasserted
claims are not included in the estimated liability. The Company's
estimated liability is reduced to reflect the anticipated
participation of other potentially responsible parties in those
instances where it is probable that such parties are legally
responsible and financially capable of paying their respective shares
of the relevant costs. The estimated liability of the Company is not
discounted or reduced for possible recoveries from insurance carriers.
INVENTORIES
Inventories are valued at the lower of cost or market. Inventory cost
at Micafil is principally determined by the specific identification
method. Effective April 1, 1995, to better match revenues and
expenses, the Company changed its method of accounting for
inventories, other than those held by Micafil, from the first in,
first out (FIFO) method to the last in, first out (LIFO) method. The
effect of the change was not material. At March 31, 1996,
approximately 94% of inventory is valued on the LIFO method.
29
<PAGE> 30
CENTRUM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
OIL AND GAS PROPERTIES
The Company uses the successful efforts method of accounting for oil
and gas producing activities. Costs to acquire mineral interests in
oil and gas properties and costs of uncompleted wells that find proved
reserves, including costs to drill and equip exploratory wells and to
drill and equip development wells are capitalized. Costs to drill
exploratory wells that do not find proved reserves and geological and
geophysical costs are charged to expense when incurred.
Unproved oil and gas properties that are individually significant are
periodically assessed for impairment of value, and a loss is
recognized at the time of impairment by providing an impairment
allowance. Support equipment and other property and equipment are
depreciated over their estimated useful lives.
GOODWILL
The Company has classified as goodwill the cost in excess of fair
value of the net assets acquired in the AH purchase transaction.
Goodwill is being amortized by the straight-line method over 20 years,
which is the period expected to be benefitted. Management reviews
goodwill and other long-lived assets for impairment whenever events
and circumstances indicate that recovery of the asset's carrying value
is unlikely. In performing the reviews for recoverability, management
compares the carrying value of the asset against the estimated future
cash flows expected to result from the use of the asset and its
eventual disposition. If the cash flows are less than the carrying
value, the asset is written down to its estimated fair market value.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Depreciation is
computed over the estimated useful lives using the straight-line
method for financial reporting purposes.
REVENUE RECOGNITION
Sales of products and services, primarily made by McInnes and AH, are
recognized as products are shipped and services are performed.
The estimated sales value of performance under significant contracts,
primarily relating to armature winding equipment and completed
production systems supplied by Micafil, is recognized under the
percentage-of-completion method of accounting measured by the contract
costs incurred to date as a percentage of total estimated contract
costs. Sales and gross profit are adjusted prospectively for
revisions in estimated total contract costs and contract values.
Contracts executed by Micafil generally have terms of less than one
year.
30
<PAGE> 31
CENTRUM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
FINANCIAL INSTRUMENTS
The carrying amount of the Company's financial instruments, which
include cash and cash equivalents, accounts receivable, marketable
equity securities, accounts payable and foreign exchange contracts
approximate their fair market values at March 31, 1996 and 1995.
Variable rate debt and debt maturing within one year with a carrying
value of $18,323,834 approximates its fair market value at March 31,
1996. Long-term, fixed rate debt with a carrying value of $4,521,486
had a fair market value of approximately $3,660,000 at March 31, 1996.
The carrying value of short and long-term debt approximated its fair
market value at March 31, 1995.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially expose the Company to
concentrations of credit risk consist primarily of trade accounts
receivable. The Company sells its products to distributors and
original equipment manufacturers in a variety of industries including
the automotive and consumer durable products industries. The Company
performs continuing credit evaluations of its customers and, in
certain circumstances, the Company may require letters of credit from
its customers. Historically, the Company has not experienced
significant losses related to receivables from individual customers or
groups of customers in any particular industry or geographic area.
PENSION PLANS
Annual net periodic pension costs under the Company's defined benefit
pension plans, arising from the acquisition of McInnes, are determined
on an actuarial basis. The Company's policy is to fund these costs as
accrued, including the amortization of obligations arising due to plan
amendments over the period benefited, through deposits with the
trustee. Benefits are determined based upon employees' length of
service.
POSTRETIREMENT BENEFITS OTHER THEN PENSIONS
Annual net postretirement benefits liability and expenses, arising
from the acquisition of McInnes, are determined on an actuarial basis.
The Company's current policy is to pre- fund these benefits to the
extent allowable under current IRS guidelines. Benefits are
determined primarily based upon employees' length of service and
include applicable employee cost sharing.
INCOME TAXES
Current tax liabilities and assets are recognized for the estimated
taxes payable or refundable on the tax returns for the current year.
Deferred tax liabilities or assets are recognized for the estimated
future tax effects attributable to temporary differences and
carryforwards that result from events that have been recognized in
either the financial statements or the tax returns, but not both. The
measurement of current deferred tax liabilities and assets is based on
provisions of enacted tax laws. Deferred tax assets are reduced, if
necessary, by the amount of any tax benefits that are not expected to
be realized.
31
<PAGE> 32
CENTRUM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
EARNINGS (LOSS) PER SHARE
Primary earnings (loss) per common and common equivalent share are
based on the weighted average number of shares of common stock and
common stock equivalents outstanding during the respective periods,
computed in accordance with the assumptions required by the treasury
stock method. Common equivalent shares include shares that would be
issuable upon the exercise of outstanding warrants and options reduced
by the number of shares that are assumed to be purchased by the
Company with the proceeds from the exercise of the warrants and
options. The shares purchased by the Company are assumed to be
purchased at the average market price existing during the respective
years and exclude options and warrants that are anti-dilutive.
STATEMENT OF CASH FLOWS
For purposes of the consolidated statement of cash flows, the Company
considers all cash and highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the
current year's presentation.
2. ACQUISITIONS
On March 8, 1996 the Company purchased all of the outstanding stock of
McInnes through a subsidiary merger. The purchase method of
accounting was used to account for this business combination. The
total purchase price of approximately $12,300,000 was financed
primarily in the form of new debt agreements and proceeds from the
sale of the Company's common stock. The first debt agreement consists
of a promissory note issued to a commercial bank for $2,850,000
payable monthly at 1.25% above the prime rate and a line-of- credit
for the lesser of $15,500,000 or "borrowing base," as defined in the
agreement. The second debt agreement is a Note and Warrant Purchase
Agreement which provides for $2,500,000 aggregate principal amount of
11% convertible debt with warrants for the purchase of 1,250,000
shares of the Company's common stock for $2 per share. Additional
funds to finance the acquisition were obtained through the sale of
485,500 shares of the Company's common stock for net proceeds of
$637,050. The remaining funds were provided by the issuance of
$1,239,000 aggregate principal amount of term notes which bear
interest at 2% per month to certain of the Company's shareholders and
directors.
32
<PAGE> 33
CENTRUM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. ACQUISITIONS (CONTINUED)
On May 17, 1993, the Company agreed to purchase all of the outstanding
capital stock of Micafil. The purchase method of accounting was used
to account for this business combination. The total purchase price of
approximately $1,750,000 was in the form of two promissory notes
issued to the seller. The first promissory note, in the amount of
$1,650,000, has been restructured as discussed at Note 7. The second
promissory note was in the amount of $100,000 plus interest at 8% with
a $52,333 principal and interest payment due December 30, 1993 and the
final principal and interest payment due March 31, 1994. The second
note was repaid during 1995. The principal amount of the second note
includes $84,000 relating to a non-competition agreement.
On September 2, 1993, the Company purchased all of the outstanding
stock of AH through a subsidiary merger. The purchase method of
accounting was used to account for this business combination. AH
became a wholly-owned subsidiary of the Company, and holders of issued
and outstanding shares of AH common stock received an aggregate amount
of 2,861,620 shares of the Company's common stock with an estimated
fair market value of $2,294,000.
The operating results of each acquisition are included in the
Company's consolidated statement of operations from the respective
dates of acquisition.
The following unaudited information presents the Company's results of
operations for the years ended March 31, 1996 and 1995 as if the
acquisitions of McInnes had occurred at the beginning of each of the
periods presented. The pro forma information is not necessarily
indicative of the results of operations which would have actually been
obtained during such periods.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
MARCH 31, MARCH 31,
1996 1995
(UNAUDITED)
<S> <C> <C>
Sales $62,248,000 $52,408,000
Net loss $(2,177,000) $(2,366,000)
Net loss per common share $ (.31) $ (.34)
Weighted average number of common
and common equivalent shares 6,937,750 6,997,550
</TABLE>
33
<PAGE> 34
CENTRUM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. INVENTORIES
Inventories consisted of the following at March 31:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Raw materials $5,035,001 $ 515,308
Work in process 4,332,492 248,297
Finished goods 305,798 455,176
---------- ----------
9,673,291 1,218,781
LIFO reserve 172,720
Reserve for excess of cost over market (450,767) (107,585)
---------- ----------
$9,395,244 $1,111,196
========== ==========
</TABLE>
4. OIL AND GAS PROPERTIES
Oil and gas properties consist of the following at March 31, 1996 and 1995:
<TABLE>
<S> <C>
Mineral interests in oil and gas properties $ 78,691
Development costs 10,217
----------
$ 88,908
==========
</TABLE>
The entire balance of the Company's oil and gas properties represents
one shallow sand waterflood project. As the project is still in the
development stage, no determination can presently be made as to the
extent of proved oil reserves, if any, that may be contained in the
project. During 1994, due to continued uncertainties regarding the
timing of future commercial production and potential future cash
flows, management determined that the aforementioned factors, as to
the timing or magnitude of future production, resulted in economic
impairment. As a result, management recorded a $240,338 provision to
write the properties down to $88,908, which management believes
approximates the fair market value at March 31, 1996 and 1995.
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following at March 31:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Land $ 298,679 $ 44,249
Building 3,038,821 675,697
Machinery and equipment 7,455,583 261,647
Furniture and fixtures 331,209 236,861
Vehicles 252,469 60,514
----------- ----------
Total 11,376,761 1,278,968
Less accumulated depreciation (314,560) (156,987)
----------- ----------
$11,062,201 $1,121,981
=========== ==========
</TABLE>
34
<PAGE> 35
CENTRUM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. BANK LINE OF CREDIT
In connection with the acquisition of McInnes, a new debt agreement
was entered into with Huntington National Bank (Huntington) which
permits the Company to borrow up to $15,500,000 on a revolving basis,
subject to available collateral, which consists of eligible accounts
receivable, equipment and inventory. Interest accrues on the unpaid
portion of the borrowings at the Huntington's prime rate (8.25% at
March 31, 1996) plus .75%. Borrowings under the agreement and
commitments for a stand by letter of credit are secured by all of
McInnes' cash, trade and other accounts receivable, inventory,
equipment and intangible assets. In addition, Huntington has either a
first or second secured interest in McInnes' real property. The total
carrying value of security at March 31, 1996, including second
mortgages, was $27,723,000. At March 31, 1996, approximately $13.2
million in total loans and commitments was available of which the
Company had borrowed $7,886,486 and had commitments relating to a
stand by letter of credit of approximately $4.6 million.
The agreement places, among other things, restrictions or limitations
on McInnes' ability to pay dividends, to pay management fees to other
affiliates or Centrum, and to make capital expenditures and incur rent
expense exceeding certain specified levels in any year. The agreement
requires McInnes to maintain minimum specified tangible net worth
levels, maintain a specified fixed charge coverage ratio and not
exceed a specified ratio of total liabilities to tangible net worth.
At March 31, 1996, McInnes was not in compliance with two of the
covenants. Huntington has waived compliance with respect to these
covenants through September 30, 1996 at which time management believes
McInnes will be in compliance.
The agreement also requires the Company to pay monthly collateral
administration and an annual facility fees aggregating $96,000 per
year and contains early termination fees of up to $370,000. The
agreement expires on February 28, 1999.
During 1995, AH had a secured bank line of credit in the maximum
amount of $700,000 or "borrowing base," as defined in the loan
agreement, if lower. At March 31, 1995, the entire line of credit was
available. Under the agreement, interest was payable monthly at the
bank's prime rate plus 2%. A commitment fee, computed at the rate of
1/2 of 1% per annum on the average daily unused amount of the total
bank commitment, was payable quarterly. This agreement terminated on
September 30, 1995.
7. LONG-TERM DEBT
Long-term debt consisted of the following at March 31:
1996 1995
Note payable to Huntington National
Bank in monthly installments of $39,584.
The note bears interest at the prime
rate (8.25% at March 31, 1996) plus
1.25%. Outstanding principal and
accrued interest are due on April 1,
1999. This note is secured by the
property specified by the Huntington
line of credit (see Note 6). $ 2,810,416
35
<PAGE> 36
CENTRUM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. LONG-TERM DEBT (CONTINUED)
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
$2.5 million aggregate principal amount of 11% convertible, unsecured
subordinated notes and warrants. The notes are convertible for up to
1,250,000 shares of Centrum's common stock and include
warrants for the purchase of 1,250,000 shares of Centrum's common
stock at $2 per share. The notes are recorded net of $600,000
allocated to the warrants. The implicit interest rate on the note is
14.5% and the outstanding balance is due in March 2001. This
agreement places certain restrictions on the Company, including the
requirement that the holders of the notes approve, in advance, any
dividends, the incurrence of new debt (with certain exceptions), and
acquisitions.
$ 1,900,000
Industrial development revenue bonds payable in annual installments.
Interest is set at a daily variable rate (1996 weighted average rate
was 3.36%) and payable monthly. The bonds mature on November 1,
2001. McInnes pays an annual commitment fee of 3% on the amount
committed under a direct pay letter of credit issued by a bank as a
credit enhancement for the bonds. This note is secured by the
property specified by the Huntington line of credit (see Note 6). 4,500,000
Note payable to the former owner of Micafil, originally due in monthly
installments of $33,456 including interest at 8% per annum. The note
is secured by the land and building at Micafil. (Total carrying
value of the security was $736,830 at March 31, 1996). During 1995,
an agreement was reached to restructure this note. Under the revised
terms of the note, $50,000 in accrued interest was paid by the
Company and $146,948 in accrued interest was forgiven by the
creditor. The revised terms specify monthly installments of $13,346,
including interest at an implicit rate of 8.61% per annum, through
June 2005. A balloon payment of $1,452,384, with interest accruing
at 8.61% from the date of the restructuring, will be payable in June
2005. 1,671,361 $ 1,536,213
Unsecured notes payable to shareholders and directors
of the Company. The notes bear interest at 2% per
month. The notes are to be repaid by August 1996.
The notes can be extended by the Company for one six
month period. 1,239,000
</TABLE>
36
<PAGE> 37
CENTRUM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. LONG-TERM DEBT (CONTINUED)
<TABLE>
1996 1995
<S> <C> <C>
Unsecured notes payable to individuals, including $405,000 and
$425,000 at March 31, 1996 and 1995, respectively, to certain
shareholders of the Company. The notes bear interest at 10% to 12%
with interest payable semi-annually. The notes are due one year
after being issued and may be renewed for an additional term of one
year at the Company's option. (A) $ 675,000 $ 745,000
Unsecured notes payable to individuals, including $275,000 and
$313,000 at March 31, 1996 and 1995, respectively, to certain
shareholders of the Company, with attached warrants. The notes are
for a term of one year at the rate of 10% per annum. Principal and
interest payments are due one year from the note date. The attached
warrants allow the note holders to purchase 1,000 shares of the
Company's common stock for each $10,000 of notes held at a purchase
price of $1 per share. (B) 659,000 709,000
Unsecured five year term notes payable to individuals, including
$555,000 and $500,000 at March 31, 1996 and 1995, respectively, to
certain shareholders of the Company, with attached warrants. The
notes bear interest at prime (8.25% at March 31, 1996) plus 0.5% to
1.0%. Principal and interest payments are due monthly. The attached
warrants allow the note holders to purchase 20,000 shares of the
Company's common stock for each $50,000 of notes held at a purchase
price of $1 per share. 1,117,348 650,000
City of Erie Enterprise Development Zone term note payable in monthly
principal and interest installments of $4,625. The note bears
interest at 3% per annum and matures on November 2, 2002. The note
is secured by specific property with a carrying value of $866,729 at
March 31, 1996. 330,709
Unsecured note payable to an individual with interest imputed at 8.66%
per annum. Payments under the note agreement are due as follows:
$100,000 in August 1995 and $56,000 in August 1996; with interest
applied at the prime lending rate.
56,000 156,000
----------- ----------
14,958,834 3,796,213
Less current maturities (2,976,425) (186,726)
----------- ----------
Noncurrent portion of long-term debt $11,982,409 $3,609,487
=========== ==========
</TABLE>
37
<PAGE> 38
CENTRUM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. LONG-TERM DEBT (CONTINUED)
(A) The unsecured notes payable to individuals contain an option that
permits the Company to extend the notes for one year. Management
intends to extend the notes that mature in fiscal 1997; accordingly,
such notes have been classified as noncurrent.
(B) The unsecured notes payable to individuals with attached warrants
contain an option that permits the Company to extend the notes for two
additional one year terms. Management intends to extend the notes
that mature in fiscal 1997; accordingly, such notes have been
classified as noncurrent.
The aggregate scheduled maturities of long-term debt for the fiscal
years subsequent to March 31, 1996 are as follows:
<TABLE>
<S> <C>
1997 $ 2,976,425
1998 2,767,204
1999 2,921,769
2000 1,128,219
2001 2,717,966
Thereafter 2,447,251
-----------
$14,958,834
===========
</TABLE>
8. POSTEMPLOYMENT BENEFITS
PENSION PLANS
McInnes has two noncontributory defined benefit pension plans covering
substantially all of its hourly employees. Monthly benefits are based
upon a rate per year of service and vest upon the completion of five
years of service. The Company's funding policy is to contribute
amounts sufficient to satisfy ERISA funding requirements.
Following is a summarization of the funded status and amounts
recognized for the McInnes' defined benefit pension plans in the
consolidated balance sheet at March 31, 1996:
<TABLE>
<CAPTION>
ASSETS ACCUMULATED
EXCEED BENEFITS
ACCUMULATED EXCEED
BENEFITS ASSETS
<S> <C> <C>
Projected benefits obligation $(3,752,913) $(338,046)
Plan assets at fair value, primarily
intermediate bonds and common stock 3,950,115 247,016
----------- ---------
Projected benefit obligation less than (in
excess of) plan assets 197,202 (91,030)
Unrecognized net (gain) loss 4,427 (15,568)
----------- ---------
Prepaid (accrued) pension cost $ 201,629 $(106,598)
=========== =========
</TABLE>
38
<PAGE> 39
CENTRUM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. POSTEMPLOYMENT BENEFITS (CONTINUED)
PENSION PLANS (CONTINUED)
At March 31, 1996, $3,577,873 of projected benefit obligations were
vested. Net pension cost for the defined pension plans for the period
from March 8, 1996 (the date the Company acquired McInnes) through
March 31, 1996 was not material.
The discount rates used in determining the actuarial present value of
the projected benefit obligations was 7.50% at March 31, 1996. The
expected long-term rate of return on plan assets was 8.0%.
McInnes, Micafil and AH also sponsor individual 401(k) profit sharing
plans covering substantially all salaried employees. The Company's
contributions to these plans in 1996, 1995 and 1994 were $50,900,
$33,600 and $37,900, respectively.
OTHER POSTEMPLOYMENT BENEFITS
Certain of the McInnes' employees are entitled to other postemployment
benefits (OPEBs), comprised primarily of health insurance benefits
under the terms of various agreements and based on a specified amount
per month. At March 31, 1996, OPEB liabilities, net of plan assets,
of $112,000 are included in the Other Liabilities caption of the
consolidated balance sheet.
The funded status of the plans at March 31, 1996 was as follows:
<TABLE>
<S> <C>
Actuarial present value of:
Fully eligible active participants $ (53,000)
Other active participants (128,000)
Retired participants (1,093,000)
-----------
Accumulated benefit obligation (1,274,000)
Plan assets at fair value 1,253,000
-----------
Unfunded status (21,000)
Unrecognized net loss (91,000)
-----------
Net postretirement benefit liability $ (112,000)
===========
</TABLE>
The net periodic postretirement benefit cost for the period from March
8, 1996 through March 31, 1996 was not material.
Investments in these plans consist of investments in money market
funds, fixed income securities, investment contracts and equity mutual
funds.
As of March 31, 1996, the discount rate was 7.50%. A medical costs
trend rate of 6% per year is assumed up to a maximum benefit of $3,120
per year pre age 65 and $924 post age 64. An increase in the assumed
medical trend rate of 1% would increase the accumulated post
retirement benefit obligation as of March 31, 1996 by approximately
$7,000. The effect of an increase in the assumed medical trend rate
of 1% on the service and interest cost components for the period ended
March 31, 1996 would not be material.
39
<PAGE> 40
CENTRUM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. INCOME TAXES
The difference between the total income tax provision computed using
the federal statutory income tax rates and the Company's effective tax
rate is as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
MARCH 31,
1996 1995 1994
<S> <C> <C> <C>
Federal statutory rate 34.0% 34.0% (34.0)%
Amortization of intangibles 5.0 15.6 3.3
Utilization of fully reserved
preacquisition net operating losses 17.9 19.7
Change in valuation allowance (38.0) (16.4) 29.9
Other 5.4 4.9 0.8
---- ---- ----
Effective tax rate 24.3% 57.8% 0.0%
==== ==== ====
</TABLE>
During 1996 and 1995, the Company reduced its income taxes payable by
$278,000 and $224,000, respectively, through the use of net
operating losses (NOLs). However, utilization of preacquisition NOLs
of $191,564 and $223,679 for 1996 and 1995, respectively, which were
fully reserved at the time of the acquisition, were recorded as a
reduction of goodwill and other intangibles, rather than as a reduction
of income tax expense.
Deferred income tax assets and liabilities are comprised of the
following at March 31:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Assets:
Environmental liabilities $ 217,957
Vacation 208,026 $ 25,991
Bonus 146,158 22,100
Consulting agreement 139,258
Other employee-related accruals 122,209
Other 141,858 153,773
Property, plant and equipment 417,435
Inventory 55,273
Net operating loss and alternative
minimum tax carryforwards 4,927,253 2,224,223
---------- ------------
Deferred tax assets before valuation allowance 5,902,719 2,898,795
Valuation allowance (3,286,184) (2,898,795)
---------- ------------
Deferred tax assets after valuation allowance 2,616,535 -
---------- ------------
Liabilities:
Inventory (471,460)
Property, plant and equipment (201,656)
---------- ------------
Deferred tax liabilities (673,116) -
---------- ------------
Net deferred tax asset $1,943,419 $ -
========== ============
</TABLE>
40
<PAGE> 41
CENTRUM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. INCOME TAXES (CONTINUED)
At March 31, 1996, the Company had approximately $11,955,000 in
federal and state net operating losses (NOLs) available which expire
in the years 2003 through 2010, and AMT credit carryforwards of
$862,500 which do not expire. Under Section 382 of the United States
Internal Revenue Code of 1986, as amended (the Code), the NOLs may be
subject to limitations. If certain stock ownership changes described
in the Code occur in the future, these restrictions would further
limit the Company's future use of its NOLs.
The Company has recorded a deferred tax asset of $4,927,253 reflecting
the federal and state tax benefit of loss carryforwards and
alternative minimum tax credits. Realization is dependent on
generating sufficient taxable income prior to the expiration of the
loss carryforwards. Although realization is not assured, management
believes that it is more likely than not that a portion of the
deferred tax asset relating to the federal loss carryforwards will be
realized. As a result, the 1996 tax provision was reduced by
$127,000. A valuation allowance has been established with respect to
the portion of deferred tax assets relating to state loss and income
tax credit carryforwards for which the Company is uncertain as to
future realization due to limitations on their use. The amount of the
valuation allowance could be increased or reduced in the near term if
estimates of future taxable income during the carryforward period
changes substantially.
10. COMMITMENTS AND CONTINGENT LIABILITIES
LITIGATION
The Company is involved in routine litigation and various legal
efforts incidental to the normal operations of its business. In
management's opinion, none of these matters will have a materially
adverse effect on the Company's consolidated financial position or
results of operations.
ENVIRONMENTAL
Erie Bronze (Erie), a subsidiary of McInnes, is a direct defendant in
two governmental cost recovery actions and other related private party
actions at a waste disposal site. With regard to the most significant
cost recovery action, Erie has negotiated a settlement which has been
approved in federal court. In addition, Erie and other parties are
responsible for performing certain cleanup work at the site pursuant
to a government order.
41
<PAGE> 42
CENTRUM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
ENVIRONMENTAL (CONTINUED)
Private party suits and actual cleanup costs in excess of governmental
estimates can affect the reliability of the Company's loss estimates.
In addition, unasserted claims are not reflected in the Company's cost
estimates. Pursuant to the environmental statutes, the Company may be
found jointly and severally liable to the government for cleanup
costs; however, management believes that the current status of
government settlements and group cleanup participation at the site
indicates that the liability will be shared by responsible parties.
Currently, there are at least 14 parties participating in various
settlements of the cost recovery actions, and 18 parties participating
in a pro rata cost sharing arrangement with respect to the site
cleanup work. The Company has negotiated an insurance settlement
which requires the carrier to reimburse the Company for site expenses
subject to a ceiling. At March 31, 1996, the Company has recorded
liabilities of $695,800, of which $350,000 was recorded as current
liabilities and has recorded a receivable from its insurance carrier
which is included in current assets. Funds are expected to be paid
over approximately three years. The total anticipated site costs and
private suits are not expected to materially exceed the recorded
liabilities.
LEASE COMMITMENTS
The Company leases an operating facility and office space for a base
annual rental of $230,000, plus increases based on the consumer price
index, under a lease agreement expiring in fiscal 1997. The Company
also leases certain equipment and vehicles under operating lease
agreements which expire at various dates through fiscal 2000. The
aggregate minimum commitments relating to these operating leases for
each of the five fiscal years following March 31, 1996 are set forth
below:
<TABLE>
<S> <C>
1997 $306,124
1998 139,885
1999 55,291
2000 16,768
2001 -
--------
$518,068
========
</TABLE>
The Company also leases office space and additional warehouse space on
a month to month basis. Total rental expense under all of the above
agreements was $336,652, $358,642 and $380,000 for the years ended
March 31, 1996, 1995 and 1994, respectively.
LETTERS OF CREDIT
At March 31, 1996, McInnes had a $4.6 million letter of credit issued
as a credit enhancement for the Erie County Development Authority
bonds (see Note 7).
OTHER
During February 1996, AH exercised its option to purchase its main
office and manufacturing facility, which currently is being leased,
for approximately $1,150,000, of which $900,000 will be financed by
seller. The agreement was still being negotiated at March 31, 1996.
42
<PAGE> 43
CENTRUM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. CAPITAL STOCK
The Company is a Delaware corporation with two classes of stock,
common stock and serial preferred stock.
The preferred stock is issuable in series and the Board of Directors,
at their discretion, may fix for each series (1) the rate of dividend,
(2) the price at and the terms and conditions on which shares may be
redeemed, (3) the amount payable per share in the event of voluntary
or involuntary liquidation, (4) sinking fund provisions, (5) the terms
and conditions on which shares may be converted, if a convertible
series, and (6) voting rights, if any.
In 1992, the Company exchanged 70,000 shares of participating
preferred stock for a 25% interest in the Techno-Chatham Project (the
Project) (a LaSalle investment). The preferred stock has no stated
coupon rate, redemption or convertible features, but has a liquidation
value of $10 per share. The Company is committed to paying dividends
based on 25% of the oil and gas revenue of the Project, net of
incurred expenses, after the Company has received the return of its
gross investment in the Project.
During 1996, the Company initiated a Private Placement Offering for
2.4 million shares of its common stock. The stock is being offered in
Units of 12,000 shares at a cost of $18,000 per Unit. Through March
31, 1996, 485,500 shares of common stock have been sold for $637,050,
which is net of $91,200 in issuance costs and expenses. The units are
being offered by Continental Capital Securities, Inc. (see Note 12).
During 1996, the Company repurchased 60,000 shares of its common stock
for $60,000.
During 1995, the Company issued 232,000 shares of common stock for
$232,000 in cash. In addition, options to acquire 40,304 shares of
common stock were exercised at $.372 per share.
In September 1993, the Company issued 2,861,620 shares of common stock
for all of the outstanding common stock of AH.
12. RELATED PARTIES
Continental Capital, Inc. (Continental) is a shareholder of the
Company and its Chairman and Chief Executive Officer was, during 1994
and 1995, the Company's Chairman and Chief Executive Officer and,
since June 1995, was a Director and Vice President of the Company and,
since December 1995, is a Director, Vice President and Secretary. In
1996, 1995 and 1994, the Company paid Continental $132,500, $15,000
and $58,000, respectively, for fees related to the issuance of stock
and debt.
43
<PAGE> 44
CENTRUM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. RELATED PARTIES (CONTINUED)
At March 31, 1996 and 1995, the Company had unsecured notes payable to
certain of its shareholders as described in Note 7.
13. BUSINESS SEGMENT INFORMATION
At March 31, 1996, the Company's operations have been classified into
five business segments as described in Note 1.
Summarized financial information by business segment for fiscal 1996,
1995 and 1994 is as follows:
<TABLE>
<CAPTION>
MATERIAL MOTOR METAL
HANDLING PRODUCTION FORMING OIL CORPORATE
1996 SYSTEMS SYSTEMS OPERATIONS AND GAS OFFICE TOTAL
<S> <C> <C> <C> <C> <C> <C>
Net sales to unaf-
filiated customers $19,451,267 $ 5,534,536 $ 2,539,899 $27,525,702
Operating profit (loss) 1,409,694 468,409 229,937 $ (33,200) $ (609,266) 1,465,574
Identifiable assets 8,236,864 3,016,597 27,624,426 115,349 1,618,512 40,611,748
Depreciation 59,496 31,094 63,373 3,044 566 157,573
Amortization 150,225 6,486 156,711
Capital expenditures 67,948 17,274 433,695 7,023 525,940
1995
Net sales to unaf-
filiated customers $12,969,997 $ 5,322,699 $18,292,696
Operating profit (loss) 739,397 434,827 $ (28,272) $ (488,113) 657,839
Identifiable assets 6,086,694 3,044,195 117,399 299,048 9,547,336
Depreciation 45,003 33,223 3,044 1,006 82,276
Amortization 160,654 16,903 177,557
Capital expenditures 88,702 10,066 98,768
1994
Net sales to unaf-
filiated customers $ 6,041,724 $ 2,718,943 $ 8,760,667
Operating profit (loss) 127,925 (231,961) $ (35,054) $ (490,208) (629,298)
Identifiable assets 5,347,393 2,405,392 122,021 66,233 7,941,039
Depreciation 19,399 25,831 3,044 3,371 51,645
Amortization 93,715 15,238 108,953
Capital expenditures 36,550 1,800 38,350
</TABLE>
44
<PAGE> 45
CENTRUM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. STOCK OPTIONS AND WARRANTS
During 1996, in connection with the acquisition of McInnes, two
officers of McInnes received options for 110,333 shares of common
stock having an exercise price of $.64 per share resulting in $94,954
in additional paid-in capital. In addition, during 1996, officers
and employees of the Company received options for 350,000 and 295,000
shares of the Company's common stock with exercise prices of $1.00
and $1.50, per share, respectively.
The following summarizes the stock option and warrant transactions
for the years ended March 31, 1996 and 1995:
<TABLE>
<CAPTION>
NUMBER PER SHARE
OF SHARES OPTION PRICE
<S> <C> <C>
Outstanding at March 31, 1994 575,162 $.372-.75
Stock option activity for the year
ended March 31, 1995
Granted
Exercised 40,304 $.372
Cancelled
-----------
Outstanding at March 31, 1995 534,858 $.372-.75
Stock option activity for the year
ended March 31, 1996
Granted 755,333 $.64 - 1.50
Exercised
Cancelled
-----------
Outstanding at March 31, 1996 1,290,191 $.372 - 1.50
===========
</TABLE>
During 1996, the Company issued 1,125,000 warrants to purchase its
common stock for $2 per share for a period of eight years. The
warrants, which were issued in connection with the 11% convertible
subordinated notes, have been valued at $600,000.
In addition, warrants to purchase 220,000 shares of the Company's
common stock for $1.00 per share were issued during 1996 in
connection with individual debt agreements with certain shareholders.
During 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 123,
"Accounting for Stock-Based Compensation." This statement sets forth
standards for accounting for stock-based compensation or allows
companies to continue to account for stock-based compensation under
the current requirements and make additional disclosure in the notes
to the financial statements. It is the Company's intention to
continue to account for stock-based compensation in accordance with
current requirements and provide the additional disclosure in the
notes to the financial statements in 1997.
45
<PAGE> 46
CENTRUM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. SALES TO MAJOR CUSTOMER
During fiscal 1996 and 1994, the Company's sales to its largest
customer totaled $3.5 and $1.2 million or 13% and 14% of sales,
respectively. All of these sales were recorded by the material
handling business segment to a customer engaged in the sale of
automotive parts.
46
<PAGE> 47
Centrum Industries, Inc.
Schedule II - Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- -------------------------- -------- ---------------------------- -------- --------
Additions
----------------------------
Balance at Charged to Charged to
Beginning Costs and Other Accounts Deductions Balance at
Description of Period Expenses -Describe -Describe End of Period
- -------------------------- --------- -------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Year ended March 31, 1996
Valuation allowance for
excess cost over market $107,585 $40,282 $ 316,202 (A) $ (13,302) (B) $ 450,767
Valuation allowance for
LIFO reserve (172,720) (A) (172,720)
Valuation allowance
for accounts receivable 60,658 19,491 56,403 (A) (42,791) (C) 93,761
Valuation allowance for
note receivable 24,733 24,733
Valuation allowance
for lease receivable 6,782 (6,782) (D)
Year ended March 31, 1995
Valuation allowance for
marketable equity
securities $337,875 $ (337,875) (E)
Valuation allowance
for obsolete inventory 186,121 (78,536) (B) $ 107,585
Valuation allowance
for accounts receivable 64,047 $47,265 (50,654) (C) 60,658
Valuation allowance
for note receivable 24,733 24,733
Valuation allowance
for lease receivable 6,782 6,782
Year Ended March 31, 1994
Valuation allowance
for marketable equity
securities $286,875 $51,000 $ 337,875
Valuation allowance
for obsolete inventory 197,699 $(11,578) (B) 186,121
Valuation allowance
for accounts receivable $ 64,047 (A) 64,047
Valuation allowance
for note receivable 24,733 24,733
Valuation allowance
for lease receivable 6,782 6,782
</TABLE>
(A) - Valuation allowance was in the opening balance sheet of a company
acquired by Centrum.
(B) - Based on the physical inventory, the need for inventory obsolescence
allowance was reduced.
(C) - Allowance for doubtful accounts was reduced by the amount of accounts
written off.
(D) - Allowance for lease receivable was reduced by the amount of lease written
off.
(E) - The marketable equity securities were sold during 1995.
47
<PAGE> 48
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF CENTRUM
The directors and executive officers of Centrum at March 31, 1996 were as
follows:
<TABLE>
<S> <C> <C>
George H. Wells Age 52 Chief Executive Officer since May 1995. President and
Chief Operating Officer from 1992 to May 1995. Director
since 1992.
William C. Davis Age 50 Vice President and Secretary since December 1995. Vice
President since May 1995. Chief Executive Officer, from
1992 to May 1995. Director since 1988.
Thomas E. Seiple Age 50 Director, since 1988.
Robert J. Fulton Age 53 Director, since 1993.
David L. Hart Age 50 Director, since 1988.
John R. Ayling Age 51 Director, since 1988.
Anthony J. DiVita Age 41 Chief Financial Officer and Treasurer, since May 1995.
Anthony A. Montani Age 57 President and Chief Operating Officer, McInnes Steel
Company, since March 1996.
Timothy M. Hunter Age 33 Vice President, Chief Financial Officer, Secretary/Treasurer,
McInnes Steel Company, since March 1996.
</TABLE>
Information concerning the backgrounds and occupations for directors and
executive officers is as follows:
George H. Wells has been Chief Executive Officer since June 1995 and President
and Chief Operating Officer from October 1992 to June 1995. From 1990 to
October, 1991, he served as President and Chief Executive Officer and Director
of Doehler Jarvis, a Toledo, Ohio based producer of die cast and semi-permanent
mold aluminum components utilized by the automotive industry and in general
industrial applications. From 1985 to 1989, he served as President and Chief
Operating Officer and as a Director of National Forge Company of Irvine,
Pennsylvania, which produced precision machined components.
William C. Davis is President, Chairman and Director of Continental Capital
Corporation, positions which he has held for over five years. From 1988 to
1995, he was the Chairman of the Board and Chief Executive Officer of Centrum.
Since 1995, he has been a Vice President and Secretary of Centrum.
Thomas E. Seiple has owned and operated United Roofing, a construction
business, for over five years.
48
<PAGE> 49
Robert J. Fulton has been a director since 1993. From 1990 until December
1992, he served as Executive Vice President and Chief Operating Officer and a
Director of Doehler-Jarvis. From 1986 through 1990, he served as a Director
and Vice President in Charge of marketing and manufacturing of National Forge
Company.
David L. Hart has worked as a manufacturer's representative in the automotive
industry and has been President of his own firm, Lee Hart Associates, for over
five years.
John R. Ayling has worked as a registered representative in the stock brokerage
business since 1969. He is currently President of Continental Capital
Management, Inc., a majority owned subsidiary of Continental Capital
Corporation.
Anthony J. DiVita was appointed to the position of Chief Financial Officer and
Treasurer in June 1995 and has been Treasurer of American Handling, Inc. since
1991.
Anthony A. Montani has been President and Chief Operating Officer of McInnes
Steel Company since March 1996. He has been active in the forging industry
for over 30 years. He has been with McInnes Steel Company for over 5 years,
serving in his most recent capacity as Vice-President of Sales and Marketing,
and as a Director.
Timothy M. Hunter was appointed Vice-President, Chief Financial Officer and
Secretary/Treasurer of McInnes Steel Company in March 1996. He has been
with McInnes Steel Company since 1986 where he most recently served as
Treasurer and as a Director.
Section 16(a) Beneficial Ownership Reporting Deficiencies
During 1996, Moramerica Capital Corporation, First New England Capital Limited
Partnership, and North Dakota Small Business Investment Company were late in
filing their Reports on Form 3 in March 1996. David L. Hart was late in filing
his Report on Form 4 for the month of February 1996.
ITEM 11. EXECUTIVE COMPENSATION
The following table shows compensation paid or awarded by Centrum during the
fiscal years ended March 31, 1996, 1995, and 1994 to the current executive
officers of Centrum for services in all capacities. No compensation was
awarded to any other executive officers of Centrum.
49
<PAGE> 50
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
---------------------------------------------------------
Name and Other annual All other
principal position Year Salary Bonus compensation compensation(2)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
George H. Wells 1996 $ 175,000 $ 56,000 $ 6,860
1995 $ 175,000 $ 20,000 $ 11,094
1994 $ 175,000 $ 2,500
Robert J. Fulton 1996 $ $
(Effective April 1995 $ 42,799 $ 52,500(1) $ 7,655
1993) 1994 $ 7,500 $ 4,845
Anthony J. DiVita 1996 $ 82,824 $ 30,000 $ 5,030
1995 $ 68,912 $ 4,400
1994 $ 71,601 $ 4,065
Anthony A. Montani 1996 $ 106,769 $ 6,439
1995 $ 104,000 $ 6,439
1994 $ 100,462 $ 5,451
Timothy M. Hunter 1996 $ 64,523 $ 6,044
1995 $ 62,400 $ 5,051
1994 $ 60,277 $ 4,721
- -----------------------
</TABLE>
(1) Consulting fees
(2) Automobile lease
50
<PAGE> 51
OPTION GRANTS IN 1996
<TABLE>
<CAPTION>
Number of Percent of
securities total options
underlying granted to Exercise or
options employees in base price Expiration Grant date
granted fiscal year per share date(1) value (2)
------- --------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C>
George H. Wells 150,000 19.9% $1.00 $75,000
William C. Davis 100,000 13.2% 1.00 50,000
Robert J. Fulton 100,000 13.2% 1.00 50,000
Anthony A. Montani 150,000 19.9% 1.50 90,000
Timothy M. Hunter 125,000 16.5% 1.50 75,000
- -----------------
</TABLE>
(1) The options expire following termination of employment.
(2) Based on the Constant Elasticity Variance of the Black-Scholes model using
the following assumptions: (a) a five year option term; (b) 80%
volatility rate; and (c) 0% dividend yield. Actual gain, if any, is
dependent upon the actual performance of the shares of common stock
underlying these options. There is no assurance that the amounts shown in
this column will be achieved.
No options were exercised for the fiscal year ended March 31, 1996 by any of
the named executives included in the summary compensation table.
The directors of Centrum do not receive any compensation for their attendance
at Board meetings nor are they reimbursed for out-of-pocket expenses for travel
to and from Board meetings.
BOARD REPORT ON EXECUTIVE COMPENSATION
Compensation is determined by Centrum's Board of Directors, excluding
interested parties. The Board of Directors engaged Mr. Wells pursuant to an
Employment Agreement dated October 12, 1992 for an annual salary of $175,000,
commencing November 15, 1992. The Board also awarded Mr. Wells options to
purchase 166,667 shares of Centrum's common stock at an exercise price of $.75.
In addition, Mr. Wells purchased 166,667 share of stock for $125,000. The
Board reserved the right in the agreement to terminate Mr. Wells for cause. In
addition to his salary, Mr. Wells is entitled to receive a performance bonus
of 5% of Centrum's consolidated before tax profit beginning with Centrum's 1993
fiscal year and ending with the 1996 fiscal year. For the 1996 fiscal year,
Mr. Wells was awarded a bonus of $56,000. In hiring Mr. Wells and setting his
salary, the Board of Directors took into account Centrum's severe financial
situation and the need for an experienced, senior executive to obtain
improvement and to accomplish the Board's long-term goals.
51
<PAGE> 52
By the Board of Directors
(excluding, when applicable,
those interested),
William C. Davis
Thomas E. Seiple
David L. Hart
John R. Ayling
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows beneficial ownership of Centrum as of March 31, 1996:
<TABLE>
<CAPTION>
Number of shares of Centrum
common stock
beneficially owned % of class
------------------ ---------------
<S> <C> <C>
John R. Ayling 568,536 9.2%
Thomas E. Seiple 60,000 *
William C. Davis 100,000 1.6%
David L. Hart 163,333 2.6%
George H. Wells 483,334 7.8%
Robert J. Fulton 433,334 7.0%
Anthony A. Montani 216,200 3.5%
Timothy M. Hunter 169,133 2.7%
</TABLE>
* Less than 0.1%
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Continental Capital, Inc. (Continental) is a shareholder of the Company and its
Chairman and Chief Executive Officer was, from 1998 to 1995, a Director and
Chief Executive Officer of the Company and has been a Vice President and
Director since June 1995 and has been a Director, Vice President and Secretary
since December 1995. In 1996 and 1995, the Company paid $47,500 and $15,000,
respectively, to Continental for fees relating to the issuance of debt. In
1996, the Company paid Continental $85,000 for fees relating to the issuance of
stock.
A Centrum shareholder, who, prior to 1993, was a director, provides certain
legal and consulting services to the Company. During 1996 and 1995, the
Company paid the shareholder $12,000 and $24,000, respectively, for such
services.
At March 31, 1996 and 1995, the Company had unsecured notes payable to certain
of its shareholders. See Note 7 to the Consolidated Financial Statements.
52
<PAGE> 53
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of the report:
1. A list of the financial statements filed as part of this report is
submitted as a separate section, the index to which is located on
page 21.
2. A list of financial statement schedules required to be filed by
Item 8 is located on page 21.
3. Exhibits
The following exhibits are included in this report or are
incorporated herein by reference:
Exhibit No./Description of Exhibit
3.1 Certificate of Incorporation, as amended (filed herewith).
3.2 Bylaws (filed herewith).
3.3 Participating Preferred Agreement (filed herewith).
4.1 The instruments defining the rights of the holders of
debentures issued in calendar year 1995, with options at $1.00
per share are not being filed herewith, as permitted by
Regulation Section 229.601(b)(4)(iii), because such
securities do not exceed 10 percent of the total assets of the
Company and its consolidated subsidiaries. The Company hereby
agrees to furnish a copy of such agreements to the Commission
upon request.
4.2 The instruments defining the rights of the holders of certain
notes, styled as "Loans," issued in 1991-1993, are not being
filed herewith, as permitted by Regulation Section
229.601(b)(4)(iii), because such securities do not exceed 10
percent of the total assets of the Company and its
consolidated subsidiaries. The Company hereby agrees to
furnish a copy of such agreements to the Commission upon
request.
4.3 The instruments defining the rights of the holders of certain
subordinated notes originally issued by American Handling,
Inc. in 1991, are not being filed herewith, as permitted by
Regulation Section 229.601(b)(4)(iii), because such
securities do not exceed 10 percent of the total assets of the
Company and its consolidated subsidiaries. The Company hereby
agrees to furnish a copy of such agreements to the Commission
upon request.
4.4 The instruments defining the rights of the holders of certain
notes, styled as "Loans With Warrants," issued in 1993-1995,
are not being filed herewith, as permitted by Regulation
Section 229.601(b)(4)(iii), because such securities do not
exceed 10 percent of the total assets of the Company and its
consolidated subsidiaries. The Company hereby agrees to
furnish a copy of such agreements to the Commission upon
request.
53
<PAGE> 54
4.5 The 11% Convertible Subordinated Notes issued in March 1996 in
the aggregate principal amount of $2,500,000 (issued together
with warrants for 1,250,000 shares of the Company's common
stock) are not being filed herewith, as permitted by
Regulation Section 229.601(b)(4)(iii), because such
securities do not exceed 10 percent of the total assets of the
Company and its consolidated subsidiaries. The Company hereby
agrees to furnish a copy of such instruments to the Commission
upon request.
4.6 Certain subordination agreements executed in March 1996 by new
and existing noteholders of the Company are not being filed
herewith, as permitted by Regulation Section
229.601(b)(4)(iii), because such securities do not exceed 10
percent of the total assets of the Company and its
consolidated subsidiaries. The Company hereby agrees to
furnish a copy of such agreements to the Commission upon
request.
4.7 The instruments defining the rights of the holders of Bridge
Notes, issued in March 1996 in the aggregate principal amount
of $1,239,000, are not being filed herewith, as permitted by
Regulation Section 229.601(b)(4)(iii), because such
securities do not exceed 10 percent of the total assets of the
Company and its consolidated subsidiaries. The Company hereby
agrees to furnish a copy of such instruments to the Commission
upon request.
4.8 The instruments defining the rights of the holders of certain
debt incurred in the acquisition of Micafil, Inc., in May
1993, including the restatements of such original instruments,
are not being filed herewith, as permitted by Regulation
Section 229.601(b)(4)(iii), because such securities do not
exceed 10 percent of the total assets of the Company and its
consolidated subsidiaries. The Company hereby agrees to
furnish a copy of such instruments to the Commission upon
request.
4.9 Reimbursement Agreement, dated as of February 29, 1996, with
respect to a letter of credit issued by The Huntington
National Bank, relating to $6,000,000 Erie County Industrial
Development Authority Variable Rate Demand Industrial
Development Revenue Bonds (McInnes Steel Company Project)
(filed herewith).
4.10 Installment Sales Agreement, dated as of November 1, 1991,
relating to the loan of proceeds from the sale of
$6,000,000 Erie County Industrial Development Authority
Variable Rate Demand Industrial Development Revenue Bonds
(McInnes Steel Company Project) (filed herewith).
9.1 Equity Holders Agreement dated as of February 29, 1996,
effective as of March 8, 1996, by and among First New England
Capital Limited Partnership, Moramerica Capital Corp., North
Dakota Small Business Investment Company, Centrum Industries,
Inc. and certain shareholders of Centrum Industries, Inc.
(filed herewith).
10.1 Agreement and Plan of Reorganization by and among Centrum
Industries, Inc., Centrum Merging Corporation, and McInnes
Steel Company, dated as of December 7, 1995 (filed as
Exhibit 7(c) to the Company's Report on Form 8-K, filed
with the Commission on December 22, 1996, and incorporated
herein by reference.)
54
<PAGE> 55
10.2 Agreement and Plan of Merger by and among Centrum Merging
Corporation and McInnes Steel Company, with Centrum
Industries, Inc., as a parent party, dated March 8, 1996
(filed as Exhibit 7(a) to the Company's Report on Form 8-K,
filed with the Commission on March 22, 1996, and
incorporated herein by reference.)
10.3 Note and Warrant Purchase Agreement dated as of February
29, 1996 and effective as of March 8, 1996, by and among
Moramerica Capital Corporation, First New England Capital
Limited Partnership, and North Dakota Small Business
Investment Company and Centrum Industries, Inc. with
respect to 11% convertible, subordinated notes and warrants
for the purchase of 1,250,000 shares of common stock
(filed herewith).
10.4 Common Stock Warrant dated as of February 29, 1996 and
effective as of March 8, 1996, issued to Moramerica Capital
Corporation for 627,445 shares of common stock (filed
herewith).
10.5 Common Stock Warrant dated as of February 29, 1996 and
effective as of March 8, 1996, issued to First New England
Capital Limited Partnership for 375,000 shares of common
stock (filed herewith).
10.6 Common Stock Warrant dated as of February 29, 1996 and
effective as of March 8, 1996, issued to First New England
Capital Limited Partnership and North Dakota Small Business
Investment Company for 247,555 shares of common stock
(filed herewith).
10.7 Put Agreement by and among Moramerica Capital Corporation,
First New England Capital Limited Partnership and North
Dakota Small Business Investment Company and Centrum
Industries, Inc. (filed herewith).
10.8 Registration Rights Agreement dated as of February 29,
1996, effective as of March 8, 1996, by and among
Moramerica Capital Corporation, First New England Capital
Limited Partnership and North Dakota Small Business
Investment Company and Centrum Industries, Inc. (filed
herewith).
10.9 Loan and Security Agreement dated as of February 29, 1996,
by and among The Huntington National Bank and McInnes Steel
Company, Eballoy Glass Products Company, Erie Bronze &
Aluminum Company and McInnes International, Inc. as
Borrowers, and Centrum Industries, Inc. and McInnes
Services, Inc. as Guarantors (filed herewith).
10.10 Continuing Guaranty Unlimited of Centrum Industries, Inc.,
dated as of February 29, 1996 (filed herewith).
10.11 Form of Common Stock Warrant, issued in connection with the
debt instruments referenced in Exhibits 4.5 above (filed
herewith).
10.12 Loan Agreement by and between the City of Erie by and
through the Enterprise Development Zone Revolving Loan Fund
and McInnes Steel Company dated as of November 2, 1995
(filed herewith).
55
<PAGE> 56
10.13 Employment Agreement with George H. Wells (filed as Exhibit
10.1 to the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1992, and incorporated herein
by reference.)
10.14 Employment Agreement with Anthony A. Montani (filed
herewith).
10.15 Employment Agreement with Timothy M. Hunter (filed
herewith).
10.16 Services Agreement with Stephen J. Mahoney (filed
herewith).
10.17 Stock Option Agreement with Anthony A. Montani (filed
herewith).
10.18 Stock Option Agreement with Anthony A. Montani (filed
herewith).
10.19 Stock Option Agreement with Timothy M. Hunter (filed
herewith).
10.20 Stock Option Agreement with Timothy M. Hunter (filed
herewith).
10.21 Bonus and Stock Option Plan of McInnes Steel Company and
its Subsidiaries (filed herewith).
10.22 Bonus and Stock Option Plan of Micafil, Inc. (filed
herewith).
10.23 Bonus and Stock Option Plan of American Handling, Inc.
(filed herewith).
11 Computation of earnings per share (filed herewith).
21 Subsidiaries (direct and indirect) of the Company (filed
herewith).
27 Financial Data Schedules
(b) Reports on Form 8-K
On March 22, 1996, the Company filed a Current Report on Form 8-K to
report on the completion of its acquisition of McInnes Steel Company.
No financial statements were filed with this Form 8-K.
56
<PAGE> 57
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Centrum has duly caused this reported to be signed on its behalf
by the undersigned, thereunto duly authorized.
CENTRUM INDUSTRIES, INC.
By: /s/ George H. Wells
----------------------------------
George H. Wells
Chief Executive Officer
Date: June 20, 1996
-------------------------------
57
<PAGE> 58
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Centrum in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Date
<S> <C> <C>
/s/ George H. Wells Principal June 20, 1996
-------------------------------------- Executive
George H. Wells Officer
Chief Executive Officer, Member -
Board of Directors
/s/ Anthony J. DiVita June 20, 1996
--------------------------------------
Anthony J. DiVita
Treasurer and Chief Financial Officer
/s/ William C. Davis June 20, 1996
--------------------------------------
William C. Davis
Vice President, Secretary
/s/ Thomas E. Seiple June 20, 1996
--------------------------------------
Thomas E. Seiple
Member - Board of Directors
/s/ David L. Hart June 20, 1996
--------------------------------------
David L. Hart
Member - Board of Director
/s/ Robert J. Fulton June 20, 1996
--------------------------------------
Robert J. Fulton
Member - Board of Directors
/s/ John R. Ayling June 20, 1996
--------------------------------------
John R. Ayling
Member - Board of Directors
</TABLE>
58
<PAGE> 59
Exhibit Index
-------------
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
3.1 Certificate of Incorporation, as amended (filed herewith).
3.2 Bylaws (filed herewith).
3.3 Participating Preferred Agreement (filed herewith).
4.1 The instruments defining the rights of the holders of debentures
issued in calendar year 1995, with options at $1.00 per share
are not being filed herewith, as permitted by Regulation Section
229.601(b)(4)(iii), because such securities do not exceed 10
percent of the total assets of the Company and its consolidated
subsidiaries. The Company hereby agrees to furnish a copy of
such agreements to the Commission upon request.
4.2 The instruments defining the rights of the holders of certain
notes, styled as "Loans," issued in 1991-1993, are not being
filed herewith, as permitted by Regulation Section
229.601(b)(4)(iii), because such securities do not exceed 10
percent of the total assets of the Company and its consolidated
subsidiaries. The Company hereby agrees to furnish a copy of
such agreements to the Commission upon request.
4.3 The instruments defining the rights of the holders of certain
subordinated notes originally issued by American Handling, Inc.
in 1991, are not being filed herewith, as permitted by
Regulation Section 229.601(b)(4)(iii), because such securities
do not exceed 10 percent of the total assets of the Company and
its consolidated subsidiaries. The Company hereby agrees to
furnish a copy of such agreements to the Commission upon
request.
4.4 The instruments defining the rights of the holders of certain
notes, styled as "Loans With Warrants," issued in 1993-1995, are
not being filed herewith, as permitted by Regulation Section
229.601(b)(4)(iii), because such securities do not exceed 10
percent of the total assets of the Company and its consolidated
subsidiaries. The Company hereby agrees to furnish a copy of
such agreements to the Commission upon request.
</TABLE>
<PAGE> 60
<TABLE>
<S> <C>
4.5 The 11% Convertible Subordinated Notes issued in March 1996 in
the aggregate principal amount of $2,500,000 (issued together
with warrants for 1,250,000 shares of the Company's common
stock) are not being filed herewith, as permitted by Regulation
Section 229.601(b)(4)(iii), because such securities do not
exceed 10 percent of the total assets of the Company and its
consolidated subsidiaries. The Company hereby agrees to furnish
a copy of such instruments to the Commission upon request.
4.6 Certain subordination agreements executed in March 1996 by new
and existing noteholders of the Company are not being filed
herewith, as permitted by Regulation Section 229.601(b)(4)(iii),
because such securities do not exceed 10 percent of the total
assets of the Company and its consolidated subsidiaries. The
Company hereby agrees to furnish a copy of such agreements to
the Commission upon request.
4.7 The instruments defining the rights of the holders of Bridge
Notes, issued in March 1996 in the aggregate principal amount of
$1,239,000, are not being filed herewith, as permitted by
Regulation Section 229.601(b)(4)(iii), because such securities
do not exceed 10 percent of the total assets of the Company and
its consolidated subsidiaries. The Company hereby agrees to
furnish a copy of such instruments to the Commission upon
request.
4.8 The instruments defining the rights of the holders of certain
debt incurred in the acquisition of Micafil, Inc., in May 1993,
including the restatements of such original instruments, are not
being filed herewith, as permitted by Regulation Section
229.601(b)(4)(iii), because such securities do not exceed 10
percent of the total assets of the Company and its consolidated
subsidiaries. The Company hereby agrees to furnish a copy of
such instruments to the Commission upon request.
4.9 Reimbursement Agreement, dated as of February 29, 1996, with
respect to a letter of credit issued by The Huntington National
Bank, relating to $6,000,000 Erie County Industrial Development
Authority Variable Rate Demand Industrial Development Revenue
Bonds (McInnes Steel Company Project) (filed herewith).
4.10 Installment Sales Agreement, dated as of November 1, 1991,
relating to the loan of proceeds from the sale of $6,000,000
Erie County Industrial Development Authority Variable Rate
Demand Industrial Development Revenue Bonds (McInnes Steel
Company Project) (filed herewith).
9.1 Equity Holders Agreement dated as of February 29, 1996,
effective as of March 8, 1996, by and among First New England
Capital Limited Partnership, Moramerica Capital Corp., North
Dakota Small Business Investment Company, Centrum Industries,
Inc. and certain shareholders of Centrum Industries, Inc. (filed
herewith).
10.1 Agreement and Plan of Reorganization by and among Centrum
Industries, Inc., Centrum Merging Corporation, and McInnes Steel
Company, dated as of December 7, 1995 (filed as Exhibit 7(c) to
the Company's Report on Form 8-K, filed with the Commission on
December 22, 1996, and incorporated herein by reference.)
</TABLE>
<PAGE> 61
<TABLE>
<S> <C>
10.2 Agreement and Plan of Merger by and among Centrum Merging
Corporation and McInnes Steel Company, with Centrum Industries,
Inc., as a parent party, dated March 8, 1996 (filed as Exhibit
7(a) to the Company's Report on Form 8-K, filed with the
Commission on March 22, 1996, and incorporated herein by
reference.)
10.3 Note and Warrant Purchase Agreement dated as of February 29,
1996 and effective as of March 8, 1996, by and among Moramerica
Capital Corporation, First New England Capital Limited
Partnership, and North Dakota Small Business Investment Company
and Centrum Industries, Inc. with respect to 11% convertible,
subordinated notes and warrants for the purchase of 1,250,000
shares of common stock (filed herewith).
10.4 Common Stock Warrant dated as of February 29, 1996 and effective
as of March 8, 1996, issued to Moramerica Capital Corporation
for 627,445 shares of common stock (filed herewith).
10.5 Common Stock Warrant dated as of February 29, 1996 and effective
as of March 8, 1996, issued to First New England Capital Limited
Partnership for 375,000 shares of common stock (filed herewith).
10.6 Common Stock Warrant dated as of February 29, 1996 and effective
as of March 8, 1996, issued to First New England Capital Limited
Partnership and North Dakota Small Business Investment Company
for 247,555 shares of common stock (filed herewith).
10.7 Put Agreement by and among Moramerica Capital Corporation, First
New England Capital Limited Partnership and North Dakota Small
Business Investment Company and Centrum Industries, Inc. (filed
herewith).
10.8 Registration Rights Agreement dated as of February 29, 1996,
effective as of March 8, 1996, by and among Moramerica Capital
Corporation, First New England Capital Limited Partnership and
North Dakota Small Business Investment Company and Centrum
Industries, Inc. (filed herewith).
10.9 Loan and Security Agreement dated as of February 29, 1996, by
and among The Huntington National Bank and McInnes Steel
Company, Eballoy Glass Products Company, Erie Bronze & Aluminum
Company and McInnes International, Inc. as Borrowers, and
Centrum Industries, Inc. and McInnes Services, Inc. as
Guarantors (filed herewith).
10.10 Continuing Guaranty Unlimited of Centrum Industries, Inc., dated
as of February 29, 1996 (filed herewith).
10.11 Form of Common Stock Warrant, issued in connection with the debt
instruments referenced in Exhibits 4.5 above (filed herewith).
10.12 Loan Agreement by and between the City of Erie by and through
the Enterprise Development Zone Revolving Loan Fund and McInnes
Steel Company dated as of November 2, 1995 (filed herewith).
</TABLE>
<PAGE> 62
<TABLE>
<S> <C>
10.13 Employment Agreement with George H. Wells (filed as Exhibit 10.1
to the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1992, and incorporated herein by reference.)
10.14 Employment Agreement with Anthony A. Montani (filed herewith).
10.15 Employment Agreement with Timothy M. Hunter (filed herewith).
10.16 Services Agreement with Stephen J. Mahoney (filed herewith).
10.17 Stock Option Agreement with Anthony A. Montani (filed herewith).
10.18 Stock Option Agreement with Anthony A. Montani (filed herewith).
10.19 Stock Option Agreement with Timothy M. Hunter (filed herewith).
10.20 Stock Option Agreement with Timothy M. Hunter (filed herewith).
10.21 Bonus and Stock Option Plan of McInnes Steel Company and its
Subsidiaries (filed herewith).
10.22 Bonus and Stock Option Plan of Micafil, Inc. (filed herewith).
10.23 Bonus and Stock Option Plan of American Handling, Inc. (filed
herewith).
11 Computation of earnings per share (filed herewith).
21 Subsidiaries (direct and indirect) of the Company (filed
herewith).
27 Financial Data Schedules
</TABLE>
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
CENTRUM MERGER CORPORATION
FIRST. The name of the corporation is Centrum Merger Corporation.
SECOND. The address of the corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
THIRD. The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH.
Section 1. Authorized Shares.
The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is sixteen million (16,000,000)
shares, of which (i) seven million five hundred thousand (7,500,000)
shares, of a par value of $.05 per share, shall be Class A Common Stock
(the "Class A Common Stock"), (ii) seven million five hundred thousand
(7,500,000) shares, of a par value of $.05 per share, shall be Class B
Common Stock (the "Class B Common Stock"), and (iii) one million
(1,000,000) shares, of a par value of $.05 per share, shall be Preferred
Stock (the "Preferred Stock").
Section 2. Class A Common Stock and Class B Common Stock.
The rights, preferences, qualifications, limitations and
restrictions of the Class A Common Stock and the Class B Common Stock are
as follows:
A. Voting Rights
1. Each share of Class A Common Stock shall entitle the holder
thereof to one vote upon each matter coming before any meeting of
stockholders. Each share of Class B Common Stock shall entitle the
holder thereof to one vote upon each matter coming before any meeting of
stockholders; provided, however, that each share of Class B Common Stock,
when voting as a single class under the General Corporation Law of the
State of Delaware with shares of any other class of securities of the
Corporation, shall entitle the holder thereof to ten (10) votes. Except
as set forth herein, all actions submitted in a vote of stockholders
shall be voted on by the holders of Class A Common Stock and Class B
Common Stock (as well as the holders of any series of Preferred Stock, if
any, entitled to vote thereon) voting together as a single class.
2. The holders of Class A Common Stock and Class B Common Stock
shall each be entitled to vote separately as a class with respect to (i)
amendments to this
<PAGE> 2
Certificate of Incorporation that alter or change the powers, preferences
or special rights of their respective class of stock so as to affect them
adversely, and (ii) such other matters as require class votes under the
General Corporation Law of the State of Delaware.
B. Dividends
1. Holders of Class A Common Stock and Class B Common Stock shall be
entitled to receive dividends on an equal per share basis, out of funds
legally available therefor, when and as declared by the Board of
Directors.
2. No dividends payable in shares of Class B Common Stock shall be
declared on Class A Common Stock and no dividends payable in shares of
Class A Common Stock shall be declared on Class B Common Stock.
C. Conversion of Class B Common Stock
1. Each share of Class B Common Stock may at any time be converted into
one (1) fully paid and nonassessable share of Class A Common Stock.
2. The holders of a certificate or certificates for Class B Common Stock,
in order to effect the conversion of shares represented thereby, shall
surrender the certificate or certificates to the Corporation or to the Transfer
Agent, accompanied by a written notice of the election to convert and by
instruments of transfer, in form satisfactory to the Corporation and to the
Transfer Agent, duly executed by such holder or his duly authorized attorney,
and the necessary stock transfer stamps or equivalent funds, if required
pursuant to subparagraph 6 below.
3. As promptly as practicable after the surrender for conversion of a
certificate or certificates representing shares of Class B Common Stock in the
manner provided in subparagraph 2, the Corporation shall issue and deliver or
cause to be issued and delivered to the person entitled thereto a certificate
for the number of full shares of the Class A Common Stock issuable upon such
conversion. The conversion shall be deemed to have been effected on the date of
the surrender of the certificate or certificates representing shares of Class B
Common Stock, and the person in whose name the certificate or certificates of
the Class A Common Shares issuable upon conversion are to be issued shall be
deemed the holder of record of the shares as of that date.
4. No adjustments with respect to dividends on shares of Class A Common
Stock or Class B Common Stock shall be made in connection with any convention
of shares of Class B Common Stock into shares of Class A Common Stock.
-2-
<PAGE> 3
5. The Corporation shall at all times have authorized but unissued, or in
its treasury, a number of shares of Class A Common Stock sufficient for the
conversion of all shares of Class B Common Stock from time to time outstanding.
6. The issuance of a certificate or certificates for shares of Class A
Common Stock upon conversion of shares of Class B Common Stock shall be made
without charge for any stamp or similar tax in respect of such issuance.
However, if any such certificate is to be issued in a name other than that of
the holder of the share or shares of Class B Common Stock converted, the person
or persons requesting the issuance thereof shall pay to the Corporation the
amount of any tax which may be payable in respect of any transfer involved in
such issuance or shall establish to the satisfaction of the Corporation that
such tax has been paid.
D. Preemptive Rights
Holders of the Class A Common Stock and Class B Common Stock shall
have no preemptive right to subscribe to any securities issued by the
Corporation.
E. Rights Upon Liquidation
In the event of dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, holders of the Class A
Common Stock and Class B Common Stock shall be entitled to payment out of
the assets of the Corporation ratably in accordance with the number of
shares held by them respectively.
Section 3. Preferred Stock.
A. Shares of Preferred Stock may be issued in one or more series at
such time or times and for such consideration or considerations as the
Board of Directors may determine. All shares of any one series shall be
of equal rank and identical in all respects.
B. The Board of Directors is expressly authorized at any time, and
from time to time, to provide for the issuance of shares of Preferred
Stock in one or more series, with such voting powers, full or limited, or
without voting powers and with such designations, preferences and
relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, as shall be stated
and expressed in the resolution or resolutions providing for the issue
thereof adopted by the Board of Directors, and as are not stated and
expressed in this Certificate of Incorporation, or any amendment thereto,
including (but without limiting the generality of the foregoing) the
following:
1. The distinctive designation and number of shares comprising such
series, which number may (except where otherwise provided by the Board of
Directors
-3-
<PAGE> 4
in creating such series) be increased or decreased (but not below the
number of shares then outstanding) from time to time by action of the
Board of Directors.
2. The dividend rate or rates on the shares of such series and the
relation which such dividends shall bear to the dividends payable on any
other class or classes or of any other series of capital stock, the terms
and conditions upon which and the periods in respect of which dividends
shall be payable, whether and upon what conditions such dividends shall
be cumulative and, if cumulative, the date or dates from which dividends
shall accumulate.
3. Whether the shares of such series shall be redeemable, the
limitations and restrictions with respect to such redemption, the time or
times when, the price or prices at which and the manner in which such
shares shall be redeemable, including the manner of selecting share of
such series for redemption if less than all shares are to be redeemed.
4. The rights to which the holders of shares of such series shall be
entitled, and the preferences, if any, over any other series (or of any
other series over such series), upon the voluntary or involuntary
liquidation, dissolution, distribution of assets or winding up of the
corporation, which rights may vary, depending on whether such
liquidation, dissolution, distribution or winding up is voluntary or
involuntary, and, if voluntary, may vary at different dates.
5. Whether the shares of such series shall be subject to the
operation of a purchase, retirement or sinking fund, and, if so, whether
and upon what conditions such purchase, retirement or sinking fund shall
be cumulative or noncumulative, the extent to which and the manner in
which such fund shall be applied to the purchase or redemption of the
shares of such series for retirement or to other corporate purposes and
the terms and provisions relative to the operation thereof.
6. Whether the shares of such series shall be convertible into or
exchangeable for shares of any other class or classes or of any other
series of any class of classes of capital stock of the Corporation, and,
if so convertible or exchangeable, the price or prices or the rate or
rates of conversion or exchange and the method, if any, of adjusting the
same, and any other terms and conditions of such conversion or exchange.
7. The voting powers, full and/or limited, if any, of the shares of
such series; and whether and under what conditions the shares of such
series (alone or together with the shares of one or more other series
having similar provisions) shall be entitled to vote separately as a
single class, for the election of one or more additional directors of the
corporation in case of dividend arrearage or other specified events, or
upon other matters.
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<PAGE> 5
8. Whether the issuance of any additional shares of such series, or
of any shares of any other series, shall be subject to restrictions as to
issuance, or as to the powers, preferences or rights of any such other
series.
9. Any other preferences, privileges and powers, and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions of such series, as the Board of Directors may
deem advisable and as shall not be inconsistent with the provisions of
this Certificate of Incorporation.
C. No dividends shall be paid or declared or set apart on any
particular series of Preferred Stock in respect of any period unless
accumulated dividends shall be or shall have been paid, or declared and
set apart for payment, pro rata on all shares of Preferred Stock at the
time outstanding of each other series which ranks equally as to dividends
with such particular series, so that the amount of dividends declared on
such particular series shall bear the same ratio to the amount declared
on each such other series as the dividend rate of such particular series
shall bear to the dividend rate of such other series.
D. Unless and except to the extent otherwise required by law or
provided in the resolution or resolutions of the Board of Directors
creating any series of Preferred Stock pursuant to this Section 3, the
holders of the Preferred Stock shall have no voting power with respect to
any matter whatsoever.
E. Shares of Preferred Stock redeemed, converted, exchanged,
purchased, retired or surrendered to the corporation, or which have been
issued and reacquired in any manner, shall, upon compliance with any
applicable provisions of the General Corporation Law of the State of
Delaware, have the status of authorized and unissued shares of Preferred
Stock and may be reissued by the Board of Directors as part of the series
of which they were originally a part or may be reclassified into and
reissued as part of a new series or as a part of any other series, all
subject to the protective conditions or restrictions of any outstanding
series of Preferred Stock.
FIFTH. The name and mailing address of the incorporator are Joan S. Vander
Linde, Schiff Hardin & Waite, 7200 Sears Tower, Chicago, Illinois 60606.
SIXTH. In furtherance and not in limitation of the powers conferred by
statute, the board of directors of the corporation is expressly authorized to
adopt, amend or repeal the By-laws of the corporation.
SEVENTH. A person who was or is a director of the corporation shall not be
personally, liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of the Delaware General Corporation Law, or (iv) for any transaction from which
the director derived
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<PAGE> 6
any improper personal benefit. Any repeal or modification of the foregoing
paragraph by the stockholders of the corporation shall not adversely affect any
right or protection of a director of the corporation existing at the time of
such repeal or modification. If the Delaware General Corporation Law is
amended to further eliminate or limit, or to authorize further elimination or
limitation of the personal liability of directors for breach of fiduciary duty
as a director, then the personal liability of a director to this corporation or
stockholders shall be eliminated or limited to the full extent permitted by the
Delaware General Corporation Law.
EIGHTH. Elections of directors need not be by written ballot unless the
By-Laws of the corporation shall so provide.
NINTH. The corporation elects not to be governed by Section 203 of the
Delaware General Corporation Law entitled "Business Combinations with
Interested Stockholders."
TENTH. Action required or permitted to be taken by the stockholders of the
corporation must be effected at a duly called annual or special meeting of
stockholders of the corporation and may not be effected by any consent in
writing by such stockholders.
ELEVENTH. Notwithstanding any other provision of this Certificate of
Incorporation or the By-Laws of the corporation (and notwithstanding the fact
that some lesser percentage may be specified by law, this Certificate of
Incorporation or the By-Laws of the corporation), any director or the entire
Board of Directors of the corporation may be removed at any time, but only for
cause and only by the affirmative vote of the holders of at least 66 2/3% of
the then outstanding voting stock. Cause for removal shall be deemed to exist
only if the director whose removal is proposed has been convicted of a felony
by, a court of competent jurisdiction or has been adjudged by a court of
competent jurisdiction to be liable for negligence or misconduct in the
performance of such director's duty to the corporation and such conviction or
adjudication is no longer subject to direct appeal.
TWELFTH. The Corporation reserves the right to amend its certificate of
incorporation, and to thereby change or repeal any provision therein contained
from time to time, in the manner prescribed at the time by statute, and all
rights conferred upon stockholders by such certificate of incorporation are
granted subject to this reservation.
The undersigned, being the incorporator herein above named, has executed
this Certificate of Incorporation this 26th day of October, 1990, thereby
acknowledging under penalties of perjury that the foregoing is the act and deed
of the undersigned and that the facts stated therein are true.
/s/ Joan Vander Linde
--------------------------------------------
Joan S. Vander Linde
-6-
<PAGE> 7
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is dated as of this 16th
day of November, 1990 between Centrum Industries, Inc., a North Dakota
corporation ("Centrum North Dakota") and Centrum Merger Corporation, a Delaware
corporation ("Centrum Delaware"). Centrum North Dakota and Centrum Delaware
are sometimes referred to jointly as the "Constituent Corporations".
WITNESSETH:
WHEREAS, Centrum Delaware is a corporation duly organized and existing
under the laws of the State of Delaware; and
WHEREAS, Centrum North Dakota is a corporation duly organized and existing
under the laws of the State of North Dakota; and
WHEREAS, the total number of shares of stock which Centrum Delaware has
authority to issue is 15,000,000 shares of Common Stock $.05 par value,
consisting of seven million five hundred thousand (7,500,000) shares of Class A
Common Stock, $.05 par value (the "Class A Common Stock," and seven million
five hundred thousand (7,500,000) shares of Class B Common Stock, $.05 par
value (the "Class B Common Stock") and 1,000,000 shares of Preferred Stock,
$.05 par value, of which 1,0000 shares of Class B Common Stock are issued and
outstanding and held by Centrum North Dakota; and
WHEREAS, the total number of shares which Centrum North Dakota has
authority to issue is 7,500,000 shares of Common Stock, $.05 par value, of
which 1,898,102 shares are issue and outstanding; and
WHEREAS, the Boards of Centrum Delaware and Centrum North Dakota have each
determined that it is advisable that Centrum North Dakota be merged with and
into Centrum Delaware (the name of which will become "Centrum Industries, Inc."
upon the effective date of the merger) and have approved such merger on the
terms and subject to the conditions hereinafter set forth in accordance with
the applicable provisions of the laws of the State of Delaware and the State of
North Dakota permitting such merger;
NOW, THEREFORE, in consideration of the foregoing and of the agreements,
covenants and provisions hereinafter set forth, Centrum Delaware and Centrum
North Dakota have agreed and do hereby agree as follows:
ARTICLE I
Subject to the approval of the shareholders of Centrum North Dakota,
Centrum North Dakota and Centrum Delaware shall be merged into a single
corporation in accordance with the applicable provisions of the laws of the
State of North Dakota and the State of Delaware by Centrum North Dakota merging
with and into Centrum Delaware, and Centrum Delaware shall be the surviving
corporation (sometimes referred to herein as the "Surviving Corporation")
<PAGE> 8
effective upon the date when (a) the Agreement is filed with the Secretary of
State of the State of Delaware in accordance with the General Corporation Law
of the State of Delaware, and (b) Articles of Merger relating to this Agreement
are filed with the Secretary of State of the State of North Dakota in
accordance with the North Dakota Business Corporation Law (the "Effective
Date").
ARTICLE II
As of the Effective Date:
(a) The Constituent Corporations shall be a single corporation which shall
be Centrum Delaware as the Surviving Corporation, and the separate existence of
Centrum North Dakota shall cease except to the extent provided by the laws of
the State of North Dakota in the case of a corporation after its merger into
another corporation.
(b) Centrum Delaware shall succeed to all of the rights, privileges,
powers and property, including without limitation, all rights, privileges,
franchises, patents, trademarks, licenses, registrations and other assets of
every kind and description, of the Constituent Corporations, in the manner of
and as more fully set forth in Section 259 of the General Corporation Law of
the State of Delaware and in Section 10-19.1-102 of the North Dakota Business
Corporation Act. Centrum Delaware shall succeed to all debts, liabilities and
obligations of the Constituent Corporations, and any claim existing or action
or proceeding pending against, and all rights of creditors in response of, and
all liens upon any property of the Constituent Corporations as if incurred or
contracted by it, all as more fully set forth in Section 259 of the General
Corporation Law of the State of Delaware and in Section 10-19.1-102 of the
North Dakota Business Corporation Act.
(c) All corporate acts, plans, policies, agreements, arrangements,
approvals and authorizations of Centrum North Dakota, its shareholders, Board
of Directors and committees thereof, officers and agents, which were valid and
effective immediately prior to the Effective Date of the merger shall be taken
for all purposes as the acts, plans, policies, agreements, arrangements,
approvals and authorities of the Surviving Corporation and shall be as
effective and binding thereon as the same were with respect to Centrum North
Dakota. The employees and agents of Centrum North Dakota shall become the
employees and agents of the Surviving Corporation and Continue to be entitled
to the same rights and benefits which they enjoyed as employees and agents of
Centrum North Dakota.
(d) The Certificate of Incorporation of Centrum Delaware shall be amended
by striking out ARTICLE FIRST thereof and substituting in lieu thereof the
following:
"ARTICLE FIRST: The name of the corporation is "Centrum Industries, Inc",
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<PAGE> 9
and, as so amended shall be the Certificate of Incorporation of the
Surviving Corporation until the same shall be amended or changed in accordance
with Delaware law.
(e) The By-Laws of Centrum Delaware as in effect on the Effective Date of
the merger shall be and constitute the By-Laws of the Surviving Corporation
until the same shall be altered, amended or repealed.
(f) The director and officers of Centrum North Dakota in office on the
Effective Date of the merger shall be and constitute the directors and officers
of the Surviving Corporation until the next annual meeting of the stockholders
of the Surviving Corporation and until their respective successors shall have
been elected and shall have qualified, or until their earlier resignation,
removal, or replacement.
ARTICLE III
The manner and basis of converting the shares of Centrum North Dakota into
shares of the Surviving Corporation and the cancellation and retirement of
shares of Centrum Delaware shall be as follows:
(a) As of the Effective Date, by virtue of the merger and without
any further action on the part of the Constituent Corporations or their
shareholders, the 1,000 shares of Class B Common Stock of Centrum
Delaware owned by Centrum North Dakota immediately prior to the Effective
Date of the merger shall be cancelled and retired, and all rights in
respect thereof shall cease.
(b) As of the Effective Date, by virtue of the merger and without
any further action on the part of the Constituent Corporations or their
shareholders, each share of Common Stock of Centrum North Dakota, $.05
par value, issued and outstanding immediately prior to the Effective Date
of the merger shall be changed and converted into one fully paid and
nonassessable share of Class B Common Stock of the Surviving Corporation,
$.05 par value. Outstanding certificates representing shares of Class B
Common Stock of Centrum North Dakota shall thenceforth represent the same
number of shares of Common Stuck of the Surviving Corporation, and the
holder thereof shall have precisely the same rights which he would have
had if such certificates had been issued by the Surviving Corporation.
ARTICLE IV
If at any time the Surviving Corporation shall consider or be advised that
any further assignment or assurance in law is necessary or desirable to vest in
the Surviving Corporation the title to any property or rights of Centrum North
Dakota, the proper officers and directors of Centrum North Dakota shall, and
will, execute and make all such proper assignments and
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<PAGE> 10
assurances in law and do all things necessary or appropriate to vest such
property or rights in the Surviving Corporation and otherwise to carry out the
purposes of this Agreement; and the officers and directors of the Surviving
Corporation are fully authorized in the name of Centrum North Dakota, or
otherwise, to take any and all such action.
ARTICLE V
This Agreement shall be submitted to the shareholders of each of the
Constituent Corporations as provided by law, and shall take effect, and be
deemed and be taken to be the Agreement and Plan of Merger of the Constituent
Corporations, upon the approval or adoption thereof by the shareholders of each
of the Constituent Corporations in accordance with all applicable laws, and
upon the certification, execution, acknowledgement, filing and recording of
such documents and the doing of such acts and things as shall be required for
accomplishing the merger under all applicable laws.
Anything herein or elsewhere to the contrary notwithstanding, this
Agreement may be terminated and abandoned by Centrum North Dakota by
appropriate resolution of its Board of Directors at any time prior to the
Effective Date of the merger in the event that for any reason consummation of
the merger is deemed inadvisable in the opinion of the Board of Directors of
Centrum North Dakota. In the event of the termination and abandonment of this
Agreement pursuant to the preceding sentence, this Agreement shall become void
and have no effect, without any liability on the part of either of the
Constituent Corporations, or their respective shareholders, directors or
officers in respect thereof.
ARTICLE VI
Centrum Delaware, as the Surviving Corporation, hereby agrees that (a) it
may be served with process in the State of North Dakota in any proceeding for
the enforcement of any obligation of Centrum North Dakota and in any proceeding
for the enforcement of the rights of a dissenting shareholder of Centrum North
Dakota, (b) the Secretary of State of North Dakota is irrevocably appointed as
its agent to accept service of process in any such proceeding at the address
set forth herein, and (c) it will promptly pay to the dissenting shareholders
of Centrum North Dakota the amount, if any, to which they are entitled under
Section 10-19.1-87 of the North Dakota Business Corporation Act.
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<PAGE> 11
IN WITNESS WHEREOF, each of the Constituent Corporations, pursuant to
authority duly given by resolutions adopted by its Board of Directors, has
caused this Agreement to be executed as of the day and year aforesaid.
Centrum Industries, Inc.
A North Dakota corporation
By /s/ John R. Ayling
--------------------------------------
Chairman of the Board
ATTEST:
By Merle E. Pheasant
-------------------------
Centrum Merger Corporation
A Delaware corporation
By /s/ John R. Ayling
--------------------------------------
Chairman of the Board
ATTEST:
By Merle E. Pheasant
-------------------------
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<PAGE> 12
CENTRUM MERGER CORPORATION
SECRETARY'S CERTIFICATE
The undersigned, Merle E. Pheasant, Jr., Secretary of Centrum Merger
Corporation, a Delaware corporation (the "Corporation"), does hereby certify
that the sole stockholder of the outstanding stock of the Corporation dispensed
with a meeting and consented in writing on November 16, 1990, pursuant to
Section 228 of the General Corporation Law of the State of Delaware, to the
adoption of the attached Agreement and Plan of Merger dated November 16, 1990
between Centrum Industries, Inc. and the Corporation.
IN WITNESS WHEREOF, I have executed this Certificate this 7th day of
December, 1990.
/s/ Merle E. Pheasant, Jr.
-------------------------------------
Merle E. Pheasant, Jr., Secretary
<PAGE> 13
CENTRUM INDUSTRIES, INC.
SECRETARY'S CERTIFICATE
The undersigned, Merle E. Pheasant, Jr., Secretary of Centrum Industries,
Inc., a North Dakota corporation (the "Corporation"), does hereby certify that
the attached Agreement and Plan of Merger between Centrum Merger Corporation
and the Corporation was submitted to the stockholders entitled to vote at the
annual meeting of the Corporation. At said meeting, the Agreement and Plan of
Merger was considered by the stockholders entitled to vote, and, a vote having
been taken for the adoption or rejection by them of the Agreement and Plan of
merger, a majority of the outstanding stock of the corporation entitled to vote
was voted for the adoption of the Agreement and Plan of Merger.
IN WITNESS WHEREOF, I have executed this Certificate this 7th day of
December, 1990.
/s/ Merle E. Pheasant, Jr.
-------------------------------------
Merle E. Pheasant, Jr., Secretary
<PAGE> 14
CERTIFICATE OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
CENTRUM INDUSTRIES, INC.
Pursuant to the general corporate laws of the State of Delaware, Section 242,
the undersigned corporation executes the following Certificate of Amendment to
the Articles of Incorporation of Centrum Industries, Inc.:
1. The present name of the corporation is Centrum Industries, Inc.
2. The authentication number for the corporation assigned by Michael
Harkins, Secretary of State of the State of Delaware, is 12835976 on
October 26, 1990.
3. The address of the corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of the registered agent at
such address is The Corporation Trust Company. The address of the
corporation's principal place of business is 5580 Monroe Street, Suite
100, Sylvania, Ohio 43560.
4. Article FOURTH, is hereby amended to read as follows:
Section 1. Authorized shares.
The total number of shares of all classes of capital stock which the
corporation shall have authority to issue is sixteen million (16,000,000)
shares, of which fifteen million (15,000,000) shares, of a par value of
$.05 per share, shall be Common Shares, and one million (1,000,000)
shares, of a par value of $.05 per share, shall be Preferred Stock.
Section 2. Capital Stock .
The rights, preferences, qualifications, limitations and restrictions on
the capital stock are as follows:
A. Voting rights.
Each share of Common Stock shall entitle the holder thereof to one
(1) vote upon each matter coming before any meeting of the
stockholders. Each share of Preferred Stock shall have no vote.
B. Dividends.
<PAGE> 15
Holders of Common Stock shall be entitled to receive dividends
on an equal per share basis, out of funds legally available
therefor, when and as declared by the Board of Directors.
Holders of Preferred Stock shall be entitled to Preferred
Stock dividends under agreement entered into between the
Corporation and the Preferred Stockholder.
C. Preemptive Rights.
Holders of Common Stock and Preferred Stock shall have no
preemptive right to subscribe to any securities issued by the
Corporation.
D. Rights Upon Liquidation.
In the event of dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, holders of Common
Stock shall be entitled to payment out of the assets of the
Corporation ratably in accordance with the number of shares held by
them respectively.
The remaining Sections of Article FOURTH shall not be amended and shall remain
as originally stated.
Article SEVENTH, is hereby amended to add to the existing Article:
(v) actions or inactions proved by clear and convincing
evidence that the director or officer deliberately intended
to cause injury to the Corporation or recklessly disregarded
the interests of the Corporation and a director or officer
shall perform his duties including his duties as a member of
a committee upon which he may serve, in good faith, in a
manner he reasonably believes to be in or not opposed to the
best interests of the Corporation, and with the care, that an
ordinary prudent person in a like position would use under
similar circumstances and personal liability of a director or
officer shall not be limited for breach of the director's or
officer's duty of loyalty to the Corporation or its
stockholders or for the acts or omissions not in good faith
or which involve intentional misconduct or a knowing
violation of law or for any transaction from which the
director or officer derived an improper personal benefit.
(vi) The Corporation shall have the power to indemnify a
director or officer within the authority of the statutes of
the State of Delaware but no indemnification shall be
available in respect of any claim, issue or matter as to
which the director or officer shall have been adjudged to be
liable to the Corporation or its shareholders. The
Corporation shall have the right to indemnify a director or
officer beyond the boundaries or statutes
-2-
<PAGE> 16
of the State of Delaware only where consistent with the
statute wherein the director or officer has acted in
good faith or in the best interests of the Corporation. The
Corporation shall also have the authority for permissive
indemnification of a director or officer of the Corporation
for actions where the director or officer is not successful
on the merits of the case.
5. The foregoing amendments to the Articles of Incorporation of Centrum
Industries, Inc. were duly adopted at the Annual Meeting of Shareholders
of the Corporation held on the 15th day of March 1994, by overwhelming
majority of the shareholders present in person or by proxy.
Signed this 4th day of May 1994,
By /s/ George H. Wells
-------------------------------------
George H. Wells, President
By /s/ William L. Faulkner
-------------------------------------
William L. Faulkner, Secretary
Centrum Industries, Inc.
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<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
THE SURVIVING CORPORATION
(A DELAWARE CORPORATION)
ARTICLE 1
OFFICES: REGISTERED AGENT
Section 1.1. Registered Office And Agent. The corporation shall maintain
in the State of Delaware a registered office and a registered agent whose
business office is identical with such registered office.
Section 1.2. Principal Business Office. The corporation shall have its
principal business office at such location within or without the State of
Delaware as the board of directors may from time to time determine. The
corporation may have other offices within or without the State of Delaware.
ARTICLE 2
STOCKHOLDERS
Section 2.1. Annual Meeting. The annual meeting of the stockholders shall
be held on the third Thursday in September each year, at the hour of 10:00
A.M., for the purpose of electing directors and for the transaction of such
other business as may properly come before the meeting. If the day fixed for
the annual meeting shall be a legal holiday, such meeting shall be held on the
next succeeding business day.
Section 2.2. Special Meetings. Special meetings of the stockholders of
the corporation may be called by the chairman of the board, president or by the
board of directors.
Section 2.3. Place of Meetings. The board of directors may designate any
place, either within or without the State Of Delaware, as the place of meeting
for any annual meeting or for any special meeting called by the board of
directors, but if no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal business office of the
corporation; provided, however, that for any meeting of the stockholders for
which a waiver of notice designating a place is signed by all of the
stockholders, then that shall be the place for the holding of such meeting.
Section 2.4. Notice Of Meetings. Written or printed notice stating the
place, date and hour of the meeting of the stockholders and, in the case of a
special meeting, the purpose or purposes for which the meeting is called, shall
be given to each stockholder of
<PAGE> 2
record entitled to vote at the meeting, not less than 10 nor more than 60 days
before the date of the meeting, or in the case of a meeting called for the
purpose of acting upon a merger or consolidation not less than 20 nor more than
60 days before the meeting. Such notice shall be given by or at the direction
of the secretary. If mailed, such notice shall be deemed to be given when
deposited in the United States mail addressed to the stockholder at his or her
address as it appears on the records of the corporation, with postage thereon
prepaid. If delivered (rather than mailed) to such address, such notice shall
be deemed to be given when so delivered.
When a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken, unless the adjournment is for
more than 30 days or unless a new record date is fixed for the adjourned
meeting.
Section 2.5. Waiver Of Notice. A waiver of notice in writing signed by a
stockholder entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice. Attendance of
a stockholder in person or by proxy at a meeting of stockholders shall
constitute a waiver of notice of such meeting except when the stockholder or
his or her proxy attends the meeting for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
Section 2.6. Meeting of All Stockholders. If all of the stockholders
shall meet at any time and place, either within or without the State of
Delaware, and shall, in writing signed by all of the stockholders, waive notice
of, and consent to the holding of, a meeting at such time and place, such
meeting shall be valid without call or notice, and at such meeting any
corporate action may be taken.
Section 2.7. Record Dates.
(a) In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, the board of directors may fix a record date, which record date shall
not precede the date on which the resolution fixing the record date is adopted
by the board of directors, and which record date shall not be more than 60 nor
less than 10 days before the date of such meeting (or 20 days if a merger or
consolidation is to be acted upon at such meeting). If no record date is fixed
by the board of directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the next day preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to
any adjournment of the meeting;
<PAGE> 3
provided, however, that the board of directors may fix a new record date for
the adjourned meeting.
(b) In order that the corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the board of
directors may fix a record date, which record date shall not precede the date
on which the resolution fixing the record date is adopted by the board of
directors, and which date shall not be more than 10 days after the date upon
which the resolution fixing the record date is adopted by the board of
directors. If no record date has been fixed by the board of directors, the
record date for determining stockholders entitled to consent to corporate
action in writing without a meeting, when no prior action by the board of
directors is required by the certificate of incorporation of the corporation or
by statute, shall be the first date on which a signed written consent setting
forth the action taken or proposed to be taken is delivered in the manner
required by law to the corporation at its registered office in the State of
Delaware or at its principal place of business or to an officer or agent of the
corporation having custody of the book in which proceedings of meetings of the
corporation's stockholders are recorded. If no record date has been fixed by
the board of directors and prior action by the board of directors is required
by the certificate of incorporation or by statute, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
board of directors adopts the resolution taking such prior action.
(c) In order that the corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the board of directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall not be more than 60 days prior to such
action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the board of directors adopts the resolution relating thereto.
(d) Only those who shall be stockholders of record on the record date so
fixed as aforesaid shall be entitled to such notice of, and to vote at, such
meeting and any adjournment thereof, or to consent to such corporate action in
writing, or to receive payment of such dividend or other distribution, or to
receive such allotment of rights, or to exercise such rights, as the case may
be, notwithstanding the transfer of any stock on the books of the corporation
after the applicable record date.
Section 2.8. Lists Of Stockholders. The officer who has charge of the
stock ledger of the corporation shall prepare and make, at least 10 days before
each meeting of stockholders, a complete list
<PAGE> 4
of the stockholders entitled to vote thereat, arranged in alphabetical order,
and showing the address of and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least 10 days prior to the meeting, either at a place
within the municipality where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where said meeting is to be held, and the list shall be produced and kept at
the time and place of meeting during the whole time thereof, for inspection by
any stockholder who may be present.
Section 2.9. Quorum and Vote Required For Action. Except as may otherwise
be provided in the certificate of incorporation of the corporation, the holders
of stock of the corporation having a majority of the total votes which all of
the outstanding stock of the corporation would be entitled to cast at the
meeting, when present in person or by proxy, shall constitute a quorum at any
meeting of the stockholders; provided, however, that where a separate vote by a
class or classes of stock is required, the holders of stock of such class or
classes having a majority of the total votes which all of the outstanding stock
of such class or classes would be entitled to cast at the meeting, when present
in person or by proxy, shall constitute a quorum entitled to take action with
respect to the vote on the matter. Unless a different number of votes is
required by statute or the certificate of incorporation of the corporation, (a)
if a quorum is present with respect to the election of directors, directors
shall be elected by a plurality of the votes cast by those stockholders present
in person or represented by proxy at the meeting and entitled to vote on the
election of directors, and (b) in all matters other than the election of
directors, if a quorum is present at any meeting of the stockholders, a
majority of the votes entitled to be cast by those stockholders present in
person or by proxy shall be the act of the stockholders except where a separate
vote by class or classes of stock is required, in which case, if a quorum of
such class or classes is present, a majority of the votes entitled to be cast
by those stockholders of such class or classes present in person or by proxy
shall be the act of the stockholders of such class or classes. If a quorum is
not present at any meeting of stockholders, then holders of stock of the
corporation who are present in person or by proxy representing a majority of
the votes cast may adjourn the meeting from time to time without further notice
and, where a separate vote by a class or classes of stock is required on any
matter, then holders of stock of such class or classes who are present in
person or by proxy representing a majority of the votes of such class or
classes cast may adjourn the meeting with respect to the vote on that matter
from time to time without further notice. At any adjourned meeting at which a
quorum is present, any business may be transacted which might have been
transacted at the original meeting. Withdrawal of stockholders from any meeting
shall not cause failure of a duly constituted quorum at that meeting.
<PAGE> 5
Section 2.10. Proxies. Each stockholder entitled to vote at a meeting of
the stockholders or to express consent to corporate action in writing without a
meeting may authorize another person or persons to act for him by proxy, but no
proxy shall be valid after three years from its date unless otherwise provided
in the proxy. Such proxy shall be in writing and shall be filed with the
secretary of the corporation before or at the time of the meeting or the giving
of such written consent, as the case may be.
Section 2.11. Voting Of Shares. Each stockholder of the corporation shall
be entitled to such vote (in person or by proxy) for each share of stock having
voting power held of record by such stockholder as shall be provided in the
certificate of incorporation of the corporation or, absent provision therein
fixing or denying voting rights, shall be entitled to one vote per share.
Section 2.12. Voting By Ballot. Any question or any election at a meeting
of the stockholders may be decided by voice vote unless the presiding officer
shall order that voting be by ballot or unless otherwise provided in the
certificate of incorporation of the corporation or required by statute.
Section 2.13. Inspectors. At any meeting of the stockholders the
presiding officer shall appoint one or more persons as inspectors for such
meeting. Such inspectors shall ascertain and report the number of shares
represented at the meeting, based upon their determination of the validity and
effect of proxies; count all votes and report the results; and do such other
acts as are proper to conduct the election and voting with impartiality and
fairness to all the stockholders. Each report of an inspector shall be in
writing and signed by him or a majority of them if there is more than one
inspector acting at such meeting. If there is more than one inspector, the
report of a majority shall be the report of the inspectors. The report of the
inspector or inspectors on the number of shares represented at the meeting and
the results of the voting shall be prima facie evidence thereof.
ARTICLE 3
DIRECTORS
Section 3.1. Powers. The business and affairs of the corporation shall be
managed under the direction of its board of directors which may do all such
lawful acts and things as are not by statute or by the certificate of
incorporation of the corporation or by these by-laws directed or required to be
exercised or done by the stockholders.
Section 3.2. Number, Election, Term Of Office And Qualifications. The
number of directors which shall constitute the whole board shall be six. The
directors shall be elected at the annual meeting of the stockholders, except as
provided in Section 3.3, and each director elected shall hold office until his
or her successor is elected and
<PAGE> 6
qualified or until his or her earlier death, resignation or removal in a manner
permitted by statute or these by-laws. Directors need not be stockholders.
Section 3.3. Vacancies. Vacancies occurring in the board of directors and
newly-created directorships resulting from any increase in the authorized
number of directors may be filled by a majority of the directors then in
office, although less than a quorum, or by a sole remaining director, and any
director so chosen shall hold office until the next annual election of
directors and until his or her successor is duly elected and qualified or until
his or her earlier death, resignation or removal in a manner permitted by
statute or these by-laws.
Section 3.4. Regular Meetings. A regular meeting of the board of
directors shall be held immediately following the close of, and at the same
place as, each annual meeting of stockholders. No notice of any such meeting,
other than this by-law, shall be necessary in order legally to constitute the
meeting, provided a quorum shall be present. In the event such meeting is not
held at such time and place, the meeting may be held at such time and place as
shall be specified in a notice given as hereinafter provided for special
meetings of the board of directors or as shall be specified in a written waiver
signed by all of the directors. The board of directors may provide, resolution,
the time and place for the holding of additional regular meetings without
notice other than such resolution.
Section 3.5. Special Meetings. Special meetings of the board may be
called by the chairman of the board, president or any two directors. The person
or persons calling a special meeting of the board shall fix the time and place
at which the meeting shall be held and such time and place shall be specified
in the notice of such meeting.
Section 3.6. Notice. Notice of any special meeting of the board of
directors shall be given at least two days previous thereto by written notice
to each director at his or her business address or such other address as he or
she may have advised the secretary of the corporation to use for such purpose.
If delivered, such notice shall be deemed to be given when delivered to such
address or to the person to be notified. If mailed, such notice shall be deemed
to be given two business days after deposit in the United Stated mail so
addressed, with postage thereon prepaid. If given by telegraph, such notice
shall be deemed to be given the next business day following the day the
telegram is given to the telegraph company. Such notice may also be given by
telephone or other means not specified herein, and in each such case shall be
deemed to be given when actually received by the director to be notified.
Notice of any meeting of the board of directors shall set forth the time and
place of the meeting. Neither the business to be transacted at, nor the purpose
of, any meeting of the of directors (regular or special) need be specified in
the notice or waiver of notice of such meeting.
<PAGE> 7
Section 3.7. Waiver Of Notice. A written waiver of notice, signed by a
director entitled to notice of a meeting of the board of directors or of a
committee of such board of which the director is a member, whether before or
after the time stated therein, shall be deemed equivalent to the giving of such
notice to that director. Attendance of a director at a meeting of the board of
directors or of a committee of such board of which the director is a member
shall constitute a waiver of notice of such meeting except when the director
attends the meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the meeting is not
lawfully called or convened.
Section 3.8. Quorum And Vote Required For Action. At all meetings of the
board of directors, a majority of the number of directors fixed by these
by-laws shall constitute a quorum for the transaction of business and the act
of a majority of the directors present at any meeting at which there is a
quorum shall be the act of the board of directors except as may be otherwise
specifically provided by statute, the certificate of incorporation or the
corporation or these by-laws. If a quorum shall not be present at any meeting
of the board of directors, a majority of the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present.
Section 3.9. Attendance By Conference Telephone. Members of the board of
directors or any committee designated by the board may participate in a meeting
of such board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation in a meeting shall
constitute presence in person at such a meeting.
Section 3.10. Presumption Of Assent. A director of the corporation who is
present at a duly convened meeting of the board of directors at which action on
any corporate matter is taken shall be conclusively presumed to have assented
to the action taken unless his or her dissent shall be entered in the minutes
of the meeting or unless he or she shall file his or her written dissent to
such action with the person as the secretary of the meeting before the
adjournment thereof or shall forward such dissent by registered or certified
mail to the secretary of the corporation immediately after the adjournment of
the meeting. Such right to dissent shall not apply to a director who voted in
favor of such action.
Section 3.11. Informal Action. Unless otherwise restricted by statute,
the certificate of incorporation of the corporation or these bylaws, any action
required or permitted to be taken at any meeting of the board of directors or
of any committee thereof may be taken without a meeting, or a written consent
thereto is signed by all the directors or by all the members of such committee,
as the case may be, and such written consent is filed with the minutes of
proceedings of the board of directors or of such committee.
<PAGE> 8
Section 3.12. Compensation. The directors may be paid their expenses, if
any, of attendance at each meeting of the board of directors and at each
meeting of a committee of the board of directors of which they are members. The
board of directors, irrespective of any personal interest of any of its
members, shall have authority to fix compensation of all directors for services
to the corporation as directors, officers or otherwise.
ARTICLE 4
COMMITTEES
Section 4.1. Committees. The board of directors may, by resolution passed
by a majority of the whole board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation, which,
to the extent provided in the resolution, shall have and may exercise the
powers of the board of directors with respect to the management of the business
affairs of the corporation and may authorize the seal of the corporation to be
affixed to all papers which may require it; but no such committee shall have
the power or authority of the board in reference to amending the certificate of
incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the board of directors, fix the designations and any of the preferences or
rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of the corporation or
fix the number of shares of any series of stock or authorize the increase or
decrease of the shares of any series), adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, recommending
to the stockholders a dissolution of the corporation or a revocation of a
dissolution, or amending the by-laws of the corporation; and, unless the
resolution, these by-laws, or the certificate of incorporation of the
corporation expressly so provides, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock or to
adopt a certificate of ownership and merger. Such committee or committees shall
have such name or names as may be determined from time to time by resolution
adopted by the board of directors and the board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. Additionally, in the
absence or disqualification of any member of such committee or committees, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not a quorum, may unanimously appoint another member of the
board of directors to act at the meeting in the place of any such absent or
disqualified member.
4.2. Committee Records. Each committee shall keep regular
<PAGE> 9
minutes of its meetings and report the same to the board of directors when
required.
ARTICLE 5
OFFICERS
Section 5.1. Designation; Number; Election. The board of directors, at
its initial meeting and thereafter at its first regular meeting after each
annual meeting of stockholders, shall choose the officers of the corporation.
Such officers shall be a president, a secretary, and a treasurer, and such vice
presidents, assistant secretaries and, assistant treasurers as the board of
directors may choose. The board of directors may appoint such other officers
and agents as it shall deem necessary who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board. Any two or more offices may be held
by the same person. Except as provided in Article 6, election or appointment as
an officer shall not of itself create contract rights.
Section 5.2. Salaries. The salaries of all officers and agents of the
corporation chosen by the board of directors shall be fixed by the board of
directors, and no officer shall be prevented from receiving such salary by
reason of the fact that he is also a director of the corporation.
Section 5.3. Term Of Office; Removal; Vacancies. Each officer of the
corporation chosen by the board of directors shall hold office until the next
annual appointment of officers by the board of directors and until his or her
successor is appointed and qualified, or until his or her earlier death,
resignation or removal in the manner hereinafter provided. Any officer or agent
chosen by the board of directors may be removed at any time by the board of
directors whenever in its judgment the best interests of the corporation would
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Any vacancy occurring in any office
of the corporation at any time or any new offices may be filled by the board of
directors for the unexpired portion of the term.
Section 5.4. Chairman of the Board. The chairman of the board shall call
each meeting of the board of directors to order and shall act as chairman of
each such meeting. He or she shall discharge such other duties as may be
prescribed by the board of directors from time to time. Except in those
instances in which the authority to execute is expressly delegated to another
officer or agent of the corporation or a different mode of execution is
expressly prescribed by the board of directors, the chairman of the board may
execute for the corporation certificates for its shares (the issue of which
shall have been authorized by the board of directors), and any contracts,
deeds, mortgages, bonds, or other instruments which the board of directors has
authorized, and he or she may (without previous authorization by the board of
directors)
<PAGE> 10
execute such contracts and other instruments as the conduct of the
corporation's business in its ordinary course requires and he or she may
accomplish such execution in each case either individually or with the
secretary, any assistant secretary, or any other officer thereunto authorized
by the board of directors, according to the requirements of the form of the
instrument.
Section 5.5. President. The president shall be subject to the direction
and control of the board of directors, shall be in charge of the business of
the corporation. In general, the president shall discharge all duties incident
to the principal executive office of the corporation and such other duties as
may be prescribed by the board of directors from time to time. Without limiting
the generality of the foregoing, the president shall see that the resolutions
and directions of the board of directors are carried into effect except in
those instances in which that responsibility is specifically assigned to some
other person by the board of directors; shall preside at all meetings of the
stockholders and, if he or she is a director of the corporation, of the board
of directors; and, except in those instances in which the authority to execute
is expressly delegated to another officer or agent of the corporation or a
different mode of execution is expressly prescribed by the board of directors,
may execute for the corporation certificates for its shares of stock (the issue
of which shall have been authorized by the board of directors), and any
contracts, deeds, mortgages, bonds or other instruments which the board of
directors has authorized, and may (without previous authorization by the board
of directors) execute such contracts and other instruments as the conduct of
the corporation's business in its ordinary course requires, and may accomplish
such execution in each case either under or without the seal of the corporation
and either individually or with the secretary, any assistant secretary, or any
other officer thereunto authorized by the board of directors, according to the
requirements of the form of the instrument. The president may vote all
securities which the corporation is entitled to vote except as and to the
extent such authority shall be vested in a different officer or agent of the
corporation by the board of directors.
Section 5.6. Vice Presidents. The vice president (and, in the event there
is more than one vice president, each of the vice presidents) shall render such
assistance to the president in the discharge of his or her duties as the
president may direct and shall perform such other duties as from time to time
may be assigned by the president or by the board of directors. In the absence
of the president or in the event of his or her inability or refusal to act, the
vice president (or in the event there may be more than one vice-president, the
vice presidents in the order designated by the board of directors, or by the
president if the board of directors has not made such a designation, or in the
absence of any designation, then in the order of seniority of tenure as vice
president) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. Except in those
<PAGE> 11
instances in which the authority to execute is expressly delegated to another
officer or agent of the corporation or a different mode of execution is
expressly prescribed by the board of directors or these by-laws, the vice
president (or each of them if there are more than one) may execute for the
corporation certificates for its shares of stock (the issue of which shall have
been authorized by the board of directors), and any contracts, deeds,
mortgages, bonds or other instruments which the board of directors has
authorized, and may (without previous authorization by the board of directors)
execute such contracts and other instruments as the conduct of the
corporation's business in its ordinary course requires, and may accomplish such
execution in each case either under or without the seal of the corporation and
either individually or with the secretary, any assistant secretary, or any
other officer thereunto authorized by the board of directors, according to the
requirements of the form of the instrument.
Section 5.7. Treasurer. The treasurer shall be the principal accounting
and financial officer of the corporation and as such shall perform all the
duties incident to the office of treasurer and such other duties as from time
to time may be assigned by the board of directors or the president. Without
limiting the generality of the foregoing, the treasurer shall have charge of
and be responsible for the maintenance of adequate books of account for the
corporation and shall have charge and custody of all funds and securities of
the corporation and be responsible therefor and for the receipt and
disbursement thereof. If required by the board of directors, the treasurer
shall give a bond for the faithful discharge of his or her duties in such sum
and with such surety or sureties as the board of directors may determine.
Section 5.8. Secretary. The secretary shall perform all duties incident
to the office of secretary and such other duties as from time to time may be
assigned by the board of directors or president. Without limiting the
generality of the foregoing, the secretary shall (a) record the minutes of the
meetings of the stockholders and the board of directors in one or more books
provided for that purpose and shall include in such books the actions by
written consent of the stockholders and the board of directors; (b) see that
all notices are duly given in accordance with the provisions of these by-laws
or as required by statute; (c) be the custodian of the corporate records and
the seal of the corporation; (d) keep a register of the post office address of
each stockholder which shall be furnished to the secretary by such stockholder;
(e) sign with the president, or a vice president, or any other officer
thereunto authorized by the board of directors, certificates for shares of
stock of the corporation (the issue of which shall have been authorized by the
board of directors), and any contracts, deeds, mortgages, bonds, or other
instruments which the board of directors has authorized, and may (without
previous authorization by the board of directors) sign with such other officers
as aforesaid such contracts and other instruments as the conduct of the
corporation's business in its ordinary course requires, in each case according
to the requirements of the form of
<PAGE> 12
the instrument, except when a different mode of execution is expressly
prescribed by the board of directors; and (f) have general charge of the stock
transfer books of the corporation.
Section 5.9. Assistant Treasurers And Assistant Secretaries. The
assistant treasurers and assistant secretaries shall perform such duties as
shall be assigned to them by the treasurer, in the case of assistant
treasurers, or the secretary, in the case of assistant secretaries, or by the
board of directors or president in either case. Each assistant secretary may
sign with the president, or a vice president, or any other officer thereunto
authorized by the board of directors, certificates for shares of stock of the
corporation (the issue of which shall have been authorized by the board of
directors), and any contracts, deeds, mortgages, bonds, or other instruments
which the board of directors has authorized, and may (without previous
authorization by the board of directors) sign with such other officers as
aforesaid such contracts and other instruments as the conduct of the
corporation's business in its ordinary course requires, in each case according
to the requirements of the form of the instrument, except when a different mode
of execution is expressly prescribed by the board of directors. The assistant
treasurers shall, if required by the board of directors, give bonds for the
faithful discharge of their duties in such sums and with such sureties as the
board of directors shall determine.
ARTICLE 6
INDEMNIFICATION
Section 6.1. Indemnification Of Directors And Officers. The corporation
shall, to the fullest extent to which it is empowered to do so by the General
Corporation law of Delaware or any other applicable laws, as may from time to
time be in effect, indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or, investigative, by
reason of the fact that such person is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director or officer of another corporation, partnership, joint venture, trust
or other enterprise, against all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding.
Section 6.2. Advancement of Expenses. Expenses incurred by an officer or
director of the corporation in defending a civil or criminal action, suit or
proceeding shall be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall be
ultimately determined that he or she is not entitled to be indemnified as
authorized by the General Corporation Law of Delaware.
<PAGE> 13
Section 6.3. Contract With The Corporation. The provisions of this
Article 6 shall be deemed to be contract between the corporation and each
person who serves as such officer or director in any such capacity at any time
while this Article and the relevant provisions of the General Corporation law
of Delaware or other applicable laws, if any, are in effect, and any repeal or
modification of any such law or of this Article 6 shall not affect any rights
or obligations then existing with respect to any state of facts then or
theretofore existing or any action, suit or proceeding theretofore or
thereafter brought or threatened based in, whole or in part upon any such state
of facts.
Section 6.4. Indemnification Of Employees And Agents. Persons who are not
covered by the foregoing provisions of this Article 6 and who are or were
employees or agents of the corporation, or are or were serving at the request
of the corporation as employees or agents of another corporation, partnership,
joint-venture, trust or other enterprise, may be indemnified to the extent
authorized at any time or from time to time by the board of directors.
Section 6.5. Other Rights Of Indemnification. The indemnification and the
advancement of expenses provided or permitted by this Article 6 shall not be
deemed exclusive of any other rights to which those indemnified may be entitled
by law or otherwise, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such person.
ARTICLE 7
LIMITATION ON DIRECTOR'S LIABILITY
The personal liability for monetary damages to the corporation or its
stockholders of a person who serves as a director of the corporation shall be
limited if and to the extent provided at the time in the certificate of
incorporation of the corporation, as then amended.
ARTICLE 8
CERTIFICATES OF STOCK AND THEIR TRANSFER
Section 8.1. Form And Execution Of Certificates. Every holder of stock in
the corporation shall be entitled to have a certificate signed by, or in the
name of, the corporation by the president or a vice president and by the
secretary or an assistant secretary of the corporation, certifying the number
of shares owned. Such certificates shall be in such form as may be determined
by the board of directors. During the period while more than one class of stock
of the corporation is authorized there will be set forth on the face or back of
the certificates which the corporation shall issue to represent each class or
series of stock a statement that the corporation will furnish, without charge
to each stockholder
<PAGE> 14
who so requests, the designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights. In case any officer, transfer agent or registrar of the corporation who
has signed, or whose facsimile signature has been placed upon, any such
certificate shall have ceased to be such officer, transfer agent or registrar
of the corporation, before such certificate is issued by the corporation, such
certificate may nevertheless be issued and delivered by the corporation with
the same effect as if the officer, transfer agent or registrar who signed, or
whose facsimile signature was placed upon, such certificate had not ceased to
be such officer, transfer agent or registrar of the corporation.
Section 8.2. Replacement Certificates. The board of directors may direct
a new certificate to be issued in place of any certificate evidencing shares of
stock of the corporation theretofore issued by the corporation alleged to have
been lost, stolen or destroyed, upon the making of an affidavit of the fact by
the person claiming the certificate to be lost, stolen or destroyed. When
authorizing such issue of a new certificate, the board of directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate, or his legal
representative, to advertise the same in such manner as it shall require and
may require such owner to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
The board of directors may delegate its authority to direct the issuance of
replacement stock certificates to the transfer agent or agents of the
corporation upon such conditions precedent may be prescribed by the board.
Section 8.3. Transfers Of Stock. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares of stock of the
corporation duly endorsed or accompanied by proper evidence of succession,
assignment, or other authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books, provided the
corporation or a transfer agent of the corporation shall not have received a
notification of adverse interest and that the conditions of Section 8-401 of
Title 6 of the Delaware Code have been met.
Section 8.4. Registered Stockholders. The corporation shall be entitled
to treat the holder of record (according to the books of the corporation) of
any share or shares of its stock as the holder in fact thereof and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other party whether or not the corporation shall have
express or other notice thereof, except as expressly provided by the laws of
the State of Delaware.
<PAGE> 15
ARTICLE 9
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 9.1. Contracts. The board of directors may authorize any officer
or officers, or agent or agents, to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the corporation, and
such authority may be general or confined to specific instances; provided,
however, that this Section 9.1 shall not be a limitation on the powers of
office granted under Article 5 of these by-laws.
Section 9.2. Loans. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the board of directors. Such authority may be
general or confined to specific instances.
Section 9.3. Checks, Drafts And Other Instruments. All checks, drafts or
other orders for the payment of money and all notes or other evidences of
indebtedness issued in the name of the corporation shall be signed by such
officer or officers or such agent or agents of the corporation and in such
manner as from time to time may be determined by the resolution of the board of
directors or by an officer or officers of the corporation designated by the
board of directors to make such determination.
Section 9.4. Deposits. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositaries as the board of directors,
or an officer or officers designated by the board of directors, may select.
ARTICLE 10
MISCELLANEOUS PROVISIONS
Section 10.1. Dividends. Subject to any provisions of any applicable
statute or of the certificate of incorporation, dividends may be declared upon
the capital stock of the corporation by the board of directors at any regular
or special meeting thereof; and such dividends may be paid in cash, property or
shares of stock of the corporation.
Section 10.2. Reserves. Before payment of any dividends, there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the board of directors from to time, in its discretion, determines to
be proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporations or
for such other purpose as the board of directors shall determine to be
conducive to the interests of the corporation, and the directors may modify or
abolish any such reserve in the manner in which it was created.
<PAGE> 16
Section 10.3. Voting Stock Of Other Corporations. In the absence of
specific action by the board of directors, the president shall have authority
to represent the corporation and to vote, on behalf of the corporation, the
securities of other corporations, both domestic and foreign, held by the
corporation.
Section 10.4. Fiscal Year. The fiscal year of the corporation shall begin
on the first day of April in each year and end the last day of the next
following March 31.
Section 10.5. Seal. The corporate seal shall have inscribed thereon the
name of the corporation and the words "Corporate Seal, Delaware". The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise applied.
Section 10.6. Severability. If any provision of these by-laws, or its
application thereof to any person or circumstances, is held invalid, the
remainder of these by-laws and the application of such provision to other
persons or circumstances shall not be affected thereby.
Section 10.7. Amendment. These by-laws may be amended or repealed, or new
by-laws may be adopted, by the board of directors of the corporation. These
by-laws may also be amended or repealed, or new by-laws may be adopted, by
action taken by the stockholders of the corporation.
<PAGE> 17
Amendments adopted by the Board of Directors on May 10, 1993:
A. Article 2, Section 2.1 of the Bylaws is hereby amended and restated to
read as follows:
Annual Meeting.
An annual meeting of the stockholders, for the election of directors
to succeed those whose terms expire and for the transaction of such other
business as may properly come before the meeting, shall be held at such
place, on such date, and at such time as the Board of Directors shall
each year fix, which date shall be within thirteen (13) months of the
last annual meeting of stockholders.
B. Article 3, Section 3.2 of the Bylaws is hereby amended and restated to
read as follows:
Number, Election, Term of Office, and Qualification of Directors
The number of directors which shall constitute the whole Board shall
be such number as the Board of Directors shall from time to time have
designated by resolution, except that in the absence of any such
designation, such number shall be six (6). The directors shall be elected
at the annual meeting of the stockholders, except as provided in this
Section 3.2 and as provided in Section 3.3. Directors need not be
stockholders. Each director shall be elected for a term of one year and
until his or her successor is elected and qualified, except as otherwise
provided herein or required by law.
Whenever the authorized number of directors is increased between
annual meetings of the stockholders, a majority of the directors then in
office shall have the power to elect such new directors for the balance
of a term and until their successors are elected and qualified. Any
decrease in the authorized number of directors shall not become effective
until the expiration of the term of the directors then in office unless,
at the time of such decrease, there shall be vacancies on the board which
are being eliminated by the decrease.
<PAGE> 1
EXHIBIT 3.3
AGREEMENT
This Agreement entered into this 26th day of March 1992, by and between K.
Michael Syring, ("Syring"), an individual residing in Toledo, Lucas County,
Ohio and Centrum Industries, Inc., ("Centrum"), a Delaware corporation with
offices in Sylvania, Lucas County, Ohio.
WHEREAS, Syring is a party to an Agreement dated November 19, 1990, by and
between Syring and LaSalle Exploration, Inc., ("LaSalle") a wholly owned
corporate subsidiary of Centrum Industries, Inc.
FURTHER, Syring desires to assign said interest in the Agreement to Centrum in
exchange for Centrum issuing to Syring seventy thousand shares of Preferred
Participating stock at a value of ten dollars ($10.00) per share
NOW THEREFORE, upon the issuance to Syring of seventy thousand shares of
Centrum Preferred Participating stock, receipt of which is hereby acknowledged,
Syring hereby assigns to Centrum his entire interest in the Agreement dated
November 19, 1990.
THIS AGREEMENT executed this 26th day of March 1992 by the undersigned.
Witness:
/s/ Merle Pheasant /s/ K. Michael Syring
- -------------------------- --------------------------
K. Michael Syring
/s/ Merle Pheasant /s/ John R. Ayling
- -------------------------- --------------------------
Centrum Industries, Inc.
John R. Ayling, Chairman
<PAGE> 2
AGREEMENT
THIS AGREEMENT, entered into this 19th day of November, 1990, by and between K.
Michael Syring ("Syring") an individual and LaSalle Exploration, Inc.,
("LaSalle"), an Ohio corporation to protect both parties in regards to mutual
business interests in the oil and gas industry.
WHEREAS, Syring has introduced LaSalle to a business opportunity known as the
Chatham Oil Pool Flood Properties ("Chatham"), described herein as Exhibit "A"
owned by Jerry Picker ("Picker"), Bob Alkire ("Alkire") and Berman Schaffer
("Schaffer") collectively referred to as "Lessors" consisting of certain
mineral leases known as the Techino Chatham Leases ("Leases").
WHEREAS, LaSalle herein agrees to pay Lessors the sum of One Hundred Thousand
Dollars ($100,000.00) for said Leases and further agrees to secure financing in
the amount of One Hundred Fifty Thousand Dollars ($150,000.00) for the initial
phase of development of Chatham. Payment to Lessors shall be pursuant to a
separate contract wherein LaSalle is insured of full repayment of said monies
in the event certain permits necessary to initiate flood operations on Chatham
for purposes of the production of oil and gas interests are not granted.
In addition, LaSalle herein grants Syring authority to engage Picker on a
contractual basis to assist LaSalle in the development of the Leases through
the first phase of flooding referred to as five spot development meaning the
process of using offsetting injection wells to secure oil from Chatham at a fee
not to exceed Twenty Thousand Dollars ($20,000.00) annually.
LaSalle herein acknowledges numerous technical field operations necessary
before permits to inject water through offset wells will be granted such as:
1. Plugging abandoned gas wells within 1350 feet of the flood area
at a cost estimated to be $3,000.00.
2. Monitoring 5 existing wells drilled and partially cased for
fluid levels below fresh water zones.
3. Drilling of a successful water supply on Chatham sufficient to
supply injection wells. This is deemed not necessary for a permit.
4. Construction of a building and a pump house for year round
operations on Chatham at an approximate cost of $20-25,000.00. This
is deemed not necessary for a permit.
LaSalle herein acknowledges initial working capital needs of approximately
Twenty Five Thousand Dollars ($25,000.00) required for insurance, bonding,
permits, survey costs and miscellaneous
<PAGE> 3
expenses before operations can begin.
LaSalle further agrees as an inducement to Syring for services rendered to
LaSalle by Syring to:
1. Provide Syring with a twenty five percent (25%) in the net
working interest in Chatham after LaSalle and any partners or
affiliates have received a one hundred percent (100%) return on
invested capital plus a ten percent (10%) annual return on invested
capital if the above stated returns and interest are paid within
thirty six (36) months from the date injection begins on the
property.
2. In the event said returns are not paid within the thirty six
(36) month period plus interest at ten percent (10%) per annum,
upon payment of the above monies plus interest, Syring will receive
a twenty percent (20%) net working interest in Chatham.
3. In the event additional monies exceeding those enumerated above
are invested in Chatham, the receipt back of Two Hundred Fifty
Thousand Dollars ($250,000.00) plus interest at ten percent (10%)
per annum shall serve as a benchmark to begin percentage
participation by Syring in Chatham.
4. The Board of Directors of LaSalle shall appoint Syring as Vice
President of Operations and LaSalle shall hold Syring harmless for
any debts incurred by LaSalle.
5. As Vice President of Operations for LaSalle, Syring shall act
as a finder giving LaSalle first right of refusal on all properties
and investments located by him. For any future properties, Syring
shall be entitled to a similar percentage participation as outlined
in this Agreement and in consideration thereof Syring herein agrees
to negotiate in good faith on behalf of LaSalle.
6. In the event LaSalle or any affiliates is unable to continue
expansion into further oil and gas investments or elects not to
continue in these areas, LaSalle as a further inducement to Syring
hereby grants unto Syring's wife a first right of refusal to
purchase properties at a purchase price based upon the average of
three (3) independent appraisals. Said option shall include not
only Syring's wife but any of her heirs or assigns.
7. Syring hereby agrees to present to LaSalle any prospect for a
period of ten (10) years from the date of this agreement and hereby
agrees not to participate in any competing business with LaSalle
without first obtaining the prior written approval from LaSalle.
<PAGE> 4
8. Syring hereby agrees to serve as an officer of LaSalle for a
period of one (1) year from the date of this agreement at a salary
of One Dollar ($1.00) and LaSalle hereby agrees to pay or reimburse
Syring for all approved expenses. Expenses are to be approved on a
monthly basis by the Board of Directors of LaSalle.
THIS AGREEMENT shall constitute the entire agreement between the parties and
shall be effective on the date first above written.
/s/ K. Michael Syring
------------------------------------
K. Michael Syring
/s/ John R. Ayling
------------------------------------
LaSalle Exploration, Inc.
by its Chairman
---------------------------
<PAGE> 1
EXHIBIT 4.9
REIMBURSEMENT AGREEMENT
DATED AS OF FEBRUARY 29, 1996
BETWEEN
THE HUNTINGTON NATIONAL BANK
AND
MCINNES STEEL COMPANY
Relating to
Erie County Industrial Development Authority Variable Rate Demand
Industrial Development Revenue Bonds
(McInnes Steel Company Project)
Porter, Wright, Morris & Arthur
41 South High Street
Columbus, Ohio 43215
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Definitions And Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Use of Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.3 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.4 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2. Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3. Letter of Credit Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 Security Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Other Documents and Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.3 Right of Set-Off Against the Borrower;
Additional Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4. Conditions to Issuance and Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.1 Conditions to Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.2 Confirmation of Filing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.3 Closing of Other Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5. Reimbursement and Other Payments; Extension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.1 Reimbursement and Other Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.2 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.3 Increased Costs Due to Change in Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.4 Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.5 Termination and Extension of Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.6 Pledge of Custody Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.7 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6. Events of Default and Remedies Upon Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.2 Remedies Upon Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.3 Cumulative Remedies; No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.1 Nonliability of the Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.2 No Representations by the Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.3 No Third Parties Benefitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.4 Indemnity by the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.5 Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
7.6 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.7 Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.8 Amendments; Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.9 Cumulative Remedies; No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.10 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.11 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.12 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.13 Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.14 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.15 Time of the Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.16 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
-ii-
<PAGE> 4
REIMBURSEMENT AGREEMENT
THIS REIMBURSEMENT AGREEMENT is entered into as of February 29, 1996, by
and between MCINNES STEEL, INC., a Pennsylvania corporation (the "Borrower")
and THE HUNTINGTON NATIONAL BANK, a national banking association (the "Bank").
1. Definitions And Accounting Terms.
1.1 Defined Terms. As used in this Reimbursement Agreement, the following
terms shall have the meaning set forth respectively after each:
"Agreement" means this Reimbursement Agreement, either as originally
executed or as it may from time to time be supplemented or amended.
"ALTA Policy" means the policy of title insurance covering the Property
required pursuant to Section 4.1.1 (f) of this Agreement.
"Authority" means the Erie County Industrial Development Authority, its
successors and assigns.
"Bond Documents" means all of the instruments and agreements which have
been or may hereafter be executed from time to time by the Trustee, the
Authority and/or the Borrower in connection with the Bonds, including without
limitation the following, as from time to time supplemented or amended:
(i) the Trust Indenture; and
(ii) the Bonds.
"Bonds" means the Erie County Industrial Development Authority Variable
Rate Industrial Development Revenue Bonds, (McInnes Steel Company Project),
Series 1991.
"Borrower's Representative" means each of one or more Persons authorized
in writing from time to time by the Borrower, with the approval of the Bank, to
deliver certificates and other documents, instruments and material to the Bank
pursuant to this Agreement.
"Business Day" means any day of the year, other than (a) a Saturday; (b) a
Sunday; (c) a day on which commercial banks located in any one or more of the
cities in which the principal corporate trust office of the Trustee, the
principal offices of the Bank and/or the Remarketing Agent are located are
required or authorized by law to remain closed; or (d) a day on which the New
York Stock Exchange is closed.
"Custody Bonds" shall have the meaning ascribed thereto in Section 4.04(a)
of the Trust Indenture and are pledged by the Borrower to the Bank pursuant to
Section 5.6 of this Agreement.
<PAGE> 5
"Event of Default" means each of those events so designated in Article 6
of this Agreement.
"Financing Statements" means the UCC-1 financing statements covering the
personal property in which security interests are created pursuant to the
Letter of Credit Documents required pursuant to Section 3.1(b) of this
Agreement, as from time to time supplemented or amended.
"GAAP" means generally accepted accounting principles applied on a
consistent basis.
"Improvements" means the improvements now or hereafter located on the
Property.
"Letter of Credit" means the letter of credit to be issued by the Bank
pursuant to this Agreement, either as originally executed or as it may from
time to time be modified, extended, renewed or replaced.
"Letter of Credit Documents" means, collectively, this Agreement and the
Security Documents, as from time to time supplemented or amended with the
written consent of the Bank.
"Loan Agreement" means the Loan and Security Agreement between the
Borrower (among others) and the Bank;, dated February 29, 1996, as from time to
time supplemented or amended.
"Loans" shall have the meaning attributed thereto in the Loan Agreement.
"Mortgage" means the Open-End Mortgage, Assignment of Rents and Security
Agreement of even date herewith executed and delivered by the Authority and the
Borrower to the Bank, as from time to time supplemented or amended with the
written consent of the Bank.
"Permitted Encumbrances" means the utility, access and other easements,
rights-of-way, mineral rights, restrictions and exceptions of record,
encumbrances, irregularities and clouds on title encumbering the Property and
described in Schedule B - I, or described as subordinated to the lien of the
Mortgage on Schedule B - 2, of the policy of title insurance in favor of the
Bank insuring the lien of the Mortgage on the Property, as from time to time
supplemented or amended with the prior written consent of the Bank.
"Person" means and includes an individual, corporation, partnership,
limited liability company, trust, unincorporated organization or association
and a government or any department or agency thereof.
-2-
<PAGE> 6
"Personal Property" means all of the Borrower's right, title and interest
in and to all inventory, equipment, furnishings and fixtures now owned or
hereafter acquired, located on, or used in connection with, the Property; all
permits, licenses and approvals necessary to operate the Project; and all of
the Borrower's accounts, including without limitation those arising from all
the rents and revenues of the Project, including those now due, past due, or to
become due, by virtue of any lease, license or other agreement for the
occupancy or use of all, or any portion, of the Project.
"Prime Rate" means the interest rate per annum established by The
Huntington National Bank from time to time as such bank's prime commercial rate
based on its consideration of economic, money market, business and competitive
factors, and is not necessarily such bank's most favored rate. Subject to any
minimum or maximum rate limitations specified by applicable law, the Prime Rate
will automatically and immediately change from time to time effective as of the
effective date of each such change in the prime commercial rate of such bank.
"Project" means the Property, the Project Facilities and the Personal
Property, which are owned and operated by the Borrower.
"Project Facilities" means the manufacturing facility described in Exhibit
B hereto, together with any additions, modifications and substitutions to those
facilities.
"Property" means the approximately 6.497-acre tract of real estate located
in Erie, Pennsylvania, in which the Authority owns fee simple title and the
Borrower owns a land contract vendee's interest, upon which the Project
Facilities are located, which real estate is more fully described in the
Mortgage.
"Remarketing Agent" means the Remarketing Agent as designated from time to
time pursuant to the provisions of the Trust Indenture.
"Security Documents" means, collectively, the Mortgage, the Financing
Statements, and any other deed of trust, mortgage, hypothecated mortgage,
security agreement, financing statement, guaranty or assignment now, heretofore
or hereafter executed to secure the obligations of the Borrower under this
Agreement, in each case either as originally executed or as the same may from
time to time be supplemented or amended with the written consent of the Bank.
"Trustee" means PNC Bank, National Association, a national banking
association, successor to Marine Bank, with its principal corporate trust
office located in Erie, Pennsylvania, or its successors as trustee under the
Trust Indenture.
"Trust Indenture" means the Trust Indenture dated as of November 1, 1991,
executed and delivered between the Authority and the Trustee, as from time to
time supplemented or amended.
-3-
<PAGE> 7
1.2 Use of Defined Terms. All capitalized terms used and not otherwise
defined herein shall have the meaning ascribed thereto in the Loan Agreement.
Any defined term used in the plural shall refer to all members of the relevant
class, and any defined term used in the singular shall refer to any number of
the members of the relevant class.
1.3 Accounting Terms. All accounting terms not specifically defined in
this Agreement shall be construed in conformity with, and all financial data
required to be submitted by this Agreement shall be prepared in conformity
with, GAAP.
1.4 Exhibits. All Exhibits to this Agreement, either as now existing or as
the
2. Letter of Credit. The Borrower entered into the Bond Documents in order
to cause the issuance of the Bonds, so that the Bond Proceeds could be used to
finance the Project. Among other credit facilities to be extended to the
Borrower and related Persons by the Bank, as more fully described in the Loan
Agreement, the Borrower has requested the Bank to issue an irrevocable letter
of credit in the form attached hereto as Exhibit "A" to replace a letter of
credit currently securing repayment of the Bonds and issued by PNC Bank,
National Association. The Letter of Credit shall have a stated amount in an
aggregate amount not exceeding $4,610,959 of which an amount not exceeding
$4,500,000 shall be available to pay the principal amount of the Bonds or the
principal portion of the purchase price of the Bonds, and an amount not
exceeding $110,959 shall be available to pay for interest accrued on the Bonds
or the interest portion of the purchase price of the Bonds for up to a maximum
of 60 days at the actual interest rate on the Bonds not to exceed an interest
rate of 15% per annum, all as more particularly provided in the Letter of
Credit. The Bank is willing to issue the Letter of Credit on the terms and
conditions contained in this Agreement, the other Letter of Credit Documents
and the Loan Agreement.
3. Letter of Credit Documents.
3.1 Security Documents. In consideration of the Bank's entry into this
Agreement and the other Letter of Credit Documents, and as security for the
prompt payment when due of all sums of principal, purchase price and interest
advanced by the Bank pursuant to the Letter of Credit as well as for payment of
any other sums owing pursuant to the Loan Agreement, this Agreement or any of
the other Letter of Credit Documents, together with any and all extensions,
renewals, modifications and amendments thereof and as security for the
performance and observance of all of the covenants, agreements and conditions
contained in the Letter of Credit, the Loan Agreement, this Agreement and all
of the other Letter of Credit Documents, the Borrower shall, at its sole
expense, execute and deliver or cause to be executed and delivered to the Bank
and record or cause to be recorded, if appropriate, the following documents,
each of which shall be in such form and content, and executed by such persons
and/or entities, as the Bank shall in its reasonable discretion require:
(a) the Mortgage; and
-4-
<PAGE> 8
(b) the Financing Statements.
3.2 Other Documents and Actions. The Borrower agrees to execute,
acknowledge and/or deliver or cause to be executed, acknowledged and/or
delivered to the Bank such other instruments, agreements and documents, and to
take such actions, upon request by the Bank, as the Bank may reasonably require
in order to carry out the purposes of the Loan Agreement, this Agreement and
the other Letter of Credit Documents, and the transactions contemplated
thereby, and to protect and/or further the validity, priority and/or
enforceability of the Security Documents or subject to the Security Documents
and the security interests thereby created, any property, together with any
renewals, additions, substitutions, replacements or betterments thereto,
intended by the terms of the Loan Agreement, this Agreement or the other Letter
of Credit Documents to be covered by the Security Documents.
3.3 Right of Set-Off Against the Borrower; Additional Collateral.
(a) Upon the occurrence and during the continuance of any Event of Default
hereunder, the Bank is hereby authorized at any time and from time to time,
without prior notice to the Borrower (any such notice being expressly waived by
the Borrower) and to the fullest extent permitted by law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by the Bank to or for
the credit or the account of the Borrower, against any and all of the
obligations of the Borrower now or hereafter existing under this Agreement, the
Loan Agreement or the Letter of Credit Documents, irrespective of whether or
not the Bank shall have made any demand hereunder and although such obligations
may be unmatured.
(b) The Bank agrees promptly to notify the Borrower after any such set-off
and application, provided that the failure to give such notice shall not affect
the validity of such set-off and application. The rights of the Bank under this
Section 3.3 are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Bank may have.
4. Conditions to Issuance and Closing.
4.1 Conditions to Issuance. The obligation of the Bank to issue the Letter
of Credit is subject to the following conditions precedent, in addition to and
not in lieu of those set forth in the Loan Agreement, unless specifically
waived in writing by the Bank:
4.1.1 The Bank shall have received all of the following, each of which
shall be in form and substance satisfactory to the Bank:
(a) manually executed counterparts of the Letter of Credit
Documents and the fees and expenses required by Section 5.1 of this
Agreement to be paid on the date of issuance of the Letter of Credit;
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(b) all of the opinions, certificates, and other documents
specified in Section 7.07 of the Trust Indenture (except to the extent
that such opinions, certificates and other documents are for the
benefit of the Trustee and are waived by the Trustee) or requested by
the Bank pursuant to the Loan Agreement and the Letter of Credit
Documents;
(c) a written opinion of counsel for the Borrower in form and
substance satisfactory to the Bank;
(d) a written opinion of counsel, in form and substance
satisfactory to the Bank, covering such matters relating to the Bond
Documents as may be required by the Bank;
(e) a current survey (or current certification of an existing
survey) of the Property certified to the Bank and the title insurance
company issuing the ALTA Policy issued by a registered surveyor in
conformity with the Bank's survey requirement standards locating the
buildings on the Property, all access roads, easements and other
encumbrances set forth in the ALTA Policy;
(f) (i) a standard ALTA mortgagee title insurance commitment, in
form and substance and issued by a title insurance company
satisfactory to the Bank, together with satisfactory evidence of
reinsurance of a portion of the title insurance company's obligations
under the final policy of title insurance if required by the Bank in
its discretion, naming the Bank as insured in a policy amount of not
less than $5,500,000.00, reflecting the Authority's marketable title
in and to, and the Borrower's land contract vendee's interest in and
to, the Project and containing only exceptions acceptable to the Bank;
and (ii) after closing and recording, a final policy of title
insurance on the ALTA 1970 (Revised 1984) form naming the Bank as
insured, containing no exceptions for filed or unfiled mechanics' or
materialmens' liens, the rights of parties in possession or as to
matters of survey, together with such endorsements and coverages as
may from time to time be required by the Bank, and insuring the
Mortgage as a valid first lien on the Project, subject only to
Permitted Encumbrances, all in conformity to the Bank's title
insurance requirements;
(g) evidence satisfactory to the Bank that there is satisfactory
ingress to and egress from the Property;
(h) evidence satisfactory to the Bank indicating that no portion
of the Property is located in a flood hazard area designated by the
U.S. Department of Housing and Urban Development;
(i) receipt with respect to the Project of: (i) a current zoning
letter from the appropriate governmental authority indicating the
final and unappealable zoning classification of the Project, a copy of
the applicable portion of the zoning code
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<PAGE> 10
indicating the permitted uses and restrictions in such zoning
classification, and a certificate of the Borrower or the Borrower's
engineer, that the Project is in compliance therewith; (ii) evidence
of the availability of public water, sewer and all other utilities
necessary for the use and operation of the Project and that the
capacities of each such utility are sufficient to adequately service
the Project; and (iii) copies of all governmental approvals required
to occupy and operate the Project;
(j) receipt of (i) a "Phase I" environmental report in conformity
with the Bank's Phase I environmental report requirements for the
Project addressed to the Bank prepared by a licensed environmental
engineering firm acceptable to the Bank, which report must indicate to
the Bank's satisfaction that the Project is free from hazardous
substance contamination and (ii) such other evidence of compliance of
the Project with applicable federal, state and local environmental
laws, regulations and requirements as the Bank may require;
(k) receipt with respect to the Borrower of: (i) a current
certified copy of its Articles of Incorporation, as amended, certified
by the Secretary of State of Pennsylvania; (ii) a current certificate
of good standing from the Secretary of State of Pennsylvania; and
(iii) a copy of its Code of Regulations, as amended, certified by its
Secretary or Assistant Secretary;
(l) receipt of certified copies of resolutions of the Board of
Directors of the Borrower authorizing it to enter into the Loan
Agreement and the Letter of Credit Documents to which it is a party,
which resolutions shall designate the names of the officers of the
Borrower authorized to execute such documents,
(m) a descriptive, narrative appraisal of the Project in form
acceptable to the Bank and certifying a valuation reasonably
satisfactory to the Bank, by an MAI appraiser acceptable to the Bank;
and
(n) such additional certificates, documents, consents or
opinions, in form and substance satisfactory to the Bank, as the Bank
may reasonably, request.
4.2 Confirmation of Filing. The Bank shall have received confirmation to
its satisfaction that the Letter of Credit Documents have been duly executed,
acknowledged, delivered and recorded or filed, as appropriate.
4.3 Closing of Other Transactions. All of the other Loans contemplated by
the Loan Agreement shall have closed, simultaneously with the issuance of the
Letter of Credit.
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<PAGE> 11
5. Reimbursement and Other Payments; Extension.
5.1 Reimbursement and Other Payments. The Borrower hereby agrees
to pay to the Bank:
(a) on the date of any Interest Draft, Tender Draft or Redemption
Draft (as such terms are defined in the Letter of Credit), a sum equal
to the amount of such Interest Draft, Tender Draft or Redemption
Draft, plus the sum of One Hundred Dollars ($100.00) for each drawing
made on the Letter of Credit;
(b) on demand, all reasonable amounts expended, advanced or
incurred by the Bank to satisfy any obligation of the Borrower under
this Agreement or any other Letter of Credit Document or to enforce
the rights of the Bank under this Agreement or any other Letter of
Credit Document or Bond Document (including without limitation any
costs incurred by the Bank in connection with any insolvency or
bankruptcy proceeding affecting the Borrower, any Guarantor, or any
tenant, sub-tenant, licensee or occupant with respect to any portion
of the Project or any other guarantor of the Borrower's obligations
under this Agreement, the Loan Agreement or any of the Security
Documents, which amounts will include all court costs, reasonable
attorneys' fees, fees of auditors and accountants and investigation
expenses reasonably incurred by the Bank in connection with any such
matters;
(c) on demand, except as otherwise provided herein, interest on
any and all amounts unpaid by the Borrower to the Bank when due under
this Agreement or any other Letter of Credit Document from the date
such amounts become due until paid in full at a fluctuating rate per
annum (computed on the basis of a year of 360 days but calculated on
the actual number of days outstanding) equal to two percent (2%) per
annum in excess of the Prime Rate;
(d) on demand, any other amounts owing to the Bank by the
Borrower under this Agreement or any of the other Letter of Credit
Documents;
(e) on the date of issuance of the Letter of Credit (i) all
attorneys' fees and out-of-pocket expenses incurred by the Bank
counsel and Bond counsel in connection with the negotiation,
preparation and execution of this Agreement, the Letter of Credit and
any and all of the other Letter of Credit Documents and security
documents in connection therewith and the transactions contemplated
thereby (including any amendments hereto or thereto or consents or
waivers hereunder or thereunder); and (ii) all fees, charges or taxes
for the recording or filing of Security Documents paid by the Bank;
(f) on the date of issuance of the Letter of Credit, the initial
fee equal to $46,878.08 for the period from the date of issuance
through and including June 30, 1996 (the "Initial Fee"); and
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<PAGE> 12
(g) on each July 1, October 1, January 1 and April 1 thereafter
that the Letter of Credit remains in effect, for the ensuing calendar
quarter commencing on the first day of that month (a "Fee Period"), a
quarterly fee (the "Quarterly Fee") equal to 0.75% of the undrawn
amount available to be drawn under the Letter of Credit on such date
(which amount will take into account all reductions or increases in
such undrawn amount through such preceding quarter), payable in
advance on the next succeeding July 1, October 1, January 1 and April
1 of the commencement of such Fee Period.
If subsequent to the payment of a Quarterly Fee under this subsection, any
amount is reinstated under the Letter of Credit which increases the undrawn
amount available to be drawn under the Letter of Credit to an amount greater
than the amount on which such fee was calculated (the "Increase Amount"), the
Borrower will pay to the Bank the Quarterly Fee on the Increase Amount within
five days of demand therefor by the Bank. In no event shall the Bank have any
obligation to make reimbursement or to otherwise account to the Borrower in
respect of fees paid by the Borrower as a result of any reduction in the
undrawn amount under the Letter of Credit and/or any later adjustment to a
fixed rate of interest on the Bonds at less than the maximum interest rate of
15% per annum. If at any point in time the Borrower fixes the interest rate on
the Bonds at a rate less than the maximum rate of 15% per annum, the Quarterly
Fee due and payable thereafter shall be due and payable on the undrawn amount
of such Letter of Credit representing the actual rate of interest on the Bonds
for the next respective Fee Period, if fixed for such Fee Period, but if the
rate of interest on the Bonds can vary during such Fee Period, the Quarterly
Fee shall be calculated on the assumed maximum interest rate of 15% per annum.
The payments to be made by the Borrower pursuant to this Agreement are in
addition to, and not in lieu of or substitution for, payments to be made to the
Bank pursuant to the Loan Agreement and the other agreements and documents
executed in connection therewith.
5.2 Payments. All payments by the Borrower to the Bank hereunder shall be
made in lawful currency of the United States of America and in immediately
available funds before 2:00 p.m., Columbus, Ohio time on the date when such
payment is due at the office of the Bank at 41 South High Street, Columbus,
Ohio 43215, Attention: International Division, Letter of Credit Department, or
at such other location as the Bank shall designate to the Borrower from time to
time in writing. Any payment received and accepted by the Bank after such time
shall be considered for all purposes (including the calculation of interest, to
the extent permitted by law) as having been made on the Bank's next following
Business Day.
If the date for any payment hereunder falls on a day that is not a
Business Day, then for all purposes of this Agreement the same shall be deemed
to have fallen on the next following Business Day, and such extension of time
shall in such case be included in the computation of payments of interest.
5.3 Increased Costs Due to Change in Law. If any change in any law or
regulation or in the interpretation thereof by any court or administrative
agency shall either (i)
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<PAGE> 13
impose, modify or deem applicable any reserve, special deposit or similar
requirement against or in connection with letters of credit issued by the Bank,
or (ii) impose on the Bank any other condition regarding this Agreement or the
Letter of Credit (other than changes in the rates of income taxation generally
applicable to the Bank), and the result of any such event shall be to increase
the cost to the Bank of issuing or maintaining the Letter of Credit (which
increase in cost shall be determined by the Bank's reasonable allocation of the
aggregate of such cost increases resulting from such events), then (a) the Bank
shall so notify the Borrower, and (b) upon receipt of such notice from the
Bank, the Borrower shall promptly pay to the Bank from time to time as
specified by the Bank additional amounts which shall be sufficient to
compensate the Bank for such increased costs, together with interest on each
such amount for the period from the date of such notice until payment in full
thereof at the Prime Rate plus two percent (2%) (computed on the basis of a
year of 360 days but calculated on the actual number of days outstanding). A
certificate setting forth in reasonable detail such increased cost incurred by
the Bank as a result of any such event, submitted by the Bank to the Borrower,
shall be prima facie evidence, absent manifest error, as to the amount thereof.
5.4 Obligations Absolute. The obligations of the Borrower under this
Agreement shall be absolute, unconditional and irrevocable, and shall be paid
and performed strictly in accordance with the terms of this Agreement, under
all circumstances whatsoever, including, without limitation, the following
circumstances:
(a) any lack of validity or enforceability of the Letter of
Credit, or any of the Letter of Credit Documents, the Loan Agreement
or the Bond Documents or any other agreement or instrument related
thereto;
(b) any amendment or waiver of, or any consent to departure from,
the terms of the Letter of Credit or any of the Letter of Credit
Documents, the Loan Agreement or the Bond Documents or any other
agreement or instrument related thereto;
(c) the existence of any claim, set-off, defense or other right
which the Borrower may have at any time against the Trustee, any
beneficiary or any transferee of the Letter of Credit (or any Person
for whom the Trustee, any such beneficiary or any such transferee may
be acting), the Bank or any other Person, whether in connection with
this Agreement, the Letter of Credit, any of the other Letter of
Credit Documents, the Bonds, the Loan Agreement or any other agreement
or instrument related thereto, or in connection with the Project, the
Loans or any unrelated transaction;
(d) any statement, draft or any other document presented under
the Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect, or any statement therein being untrue or
inaccurate in any respect whatsoever (except to the extent acceptance
or reliance upon any such statement, draft or other document is a
result of the Bank's gross negligence or willful misconduct);
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<PAGE> 14
(e) the surrender or impairment of any security for the
performance or observance of the terms of this Agreement, any of the
other Letter of Credit Documents, the Loan Agreement or any other
agreement related thereto; or
(f) any other circumstance, happening or omission whatsoever,
whether or not similar to any of the foregoing, provided, that such
circumstance, happening or omission is not a result of the Bank's
gross negligence or willful misconduct.
5.5 Termination and Extension of Letter of Credit. The Letter of Credit
shall terminate in accordance with the terms and conditions of the Letter of
Credit; provided, however, that, subject to such terms and conditions, the
Expiration Date, as set forth in the Letter of Credit, may be extended pursuant
to, and otherwise in accordance with, the following terms and conditions:
(a) On November 6, 1999, and, if so extended on November 6, 1999,
on November 6, 2000, if the Extension Notice (as hereinafter
described) shall have theretofore been timely delivered by the Bank to
the Borrower and the Trustee, the Expiration Date shall be extended
for one full year. If the Expiration Date is so extended, the Trustee
shall, not later than thirty (30) days thereafter, surrender the
outstanding Letter of Credit to the Bank and accept, upon such
surrender, a substitute irrevocable letter of credit in the form of
Exhibit A to this Agreement, dated the date of such substitution and
having an Expiration Date which is one year later than the Expiration
Date, but otherwise having terms identical to the surrendered Letter
of Credit. In lieu of surrendering the Letter of Credit and accepting
a substitute therefor, the Trustee may accept a written notice of
extension from the Bank notifying the Trustee that the Bank has
extended the Expiration Date for a period of one year.
(b) Not later than 6 months prior to November 6, 1999, and, if
extended on November 6, 1999, not later than 6 months prior to
November 6, 2000, and, provided the Bank has theretofore timely given
the Borrower and the Trustee the Extension Notice, the Bank may, in
its sole discretion, by notice in writing given by the Bank to the
Borrower and the Trustee (the "Extension Notice"), advise the Borrower
and the Trustee that the Expiration Date will be extended in
accordance with paragraph (a) of this Section 5.5. In the event the
Bank determines not to extend the Expiration Date, the Bank agrees to
give the Borrower at least 6 months' written notice of such
determination.
5.6 Pledge of Custody Bonds.
(a) As security for the payment and performance of all
obligations of the Borrower to the Bank hereunder and under the other
Letter of Credit Documents, the Borrower hereby agrees that upon the
making of a Tender Draft (as defined in the Letter of Credit) the
Borrower will forthwith deliver to the Trustee for the benefit of the
Bank Bonds free and clear of all other liens and encumbrances in an
aggregate principal
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<PAGE> 15
amount equal to the amount of such Tender Draft, less (i) any portion
of such Tender Draft representing interest on the Bonds so
purchased, and (ii) the amounts the Bank is reimbursed by 2:00 p.m.
Columbus, Ohio time on the Bond Purchase Date corresponding to the
date of such Tender Draft (collectively, the "Custody Bonds"), and the
Borrower hereby grants to the Bank a security interest in the Custody
Bonds and in the proceeds thereof.
(b) The Borrower hereby agrees to deliver or cause to be
delivered immediately to the Trustee for the benefit of the Bank the
Custody Bonds which shall be held by the Trustee in its custody and
control for the benefit of the Bank in accordance with Section 4.04 of
the Trust Indenture. The Borrower further agrees to cause the Trustee
to enter into its registration books as the address to which payments
of principal, premium, if any, and interest with respect to Custody
Bonds are to be sent, the Bank's address for notices pursuant to
Section 7.11 hereof as in effect from time to time.
(c) If the Borrower shall become entitled to receive or shall
receive any Custody Bonds, any payment of interest with respect to the
Custody Bonds, or any and all other proceeds thereof, the Borrower
shall accept any such items as the Bank's agent, shall hold them in
trust for the Bank, and shall deliver them forthwith to the Bank in
the exact form received, with the Borrower's endorsement to the order
of the Bank when necessary, to be held by the Bank, subject to the
terms hereof, as security for the payment and performance of all
obligations of the Borrower hereunder and under the other Letter of
Credit Documents, except that the Bank shall credit all payments and
proceeds received by the Bank directly against the Borrower's
obligations under Section 5.1 of this Agreement as provided below.
(d) All principal, premium, if any, and interest paid on the
Custody Bonds shall be retained by the Bank (or if received by the
Borrower shall be forthwith delivered by it to the Bank in the
original form received) and applied by the Bank to the payment of
amounts due the Bank from the Borrower hereunder, under the Loan
Agreement and under the other Letter of Credit Documents.
(e) If the Borrower makes or causes to be made to the Bank a
payment of a Tender Draft pursuant to Section 5.l(a) hereof, or a
Remarketing Agent resells Custody Bonds on behalf of the Borrower, the
Bank agrees to release from the lien of this Agreement and, if the
Custody Bonds are in the Bank's possession, to deliver to the Borrower
or the Remarketing Agent as the case may be, Custody Bonds, endorsed
in blank without recourse in an aggregate principal amount equal to
the amount of such payment with respect to principal so made, or the
principal amount of the Custody Bonds so resold to the extent that the
proceeds of such resale are delivered to the Bank.
(f) In addition to the rights and remedies granted to the Bank in
this Agreement, the Bank shall have all of the rights and remedies of
a secured party under Chapter 1309 of the Ohio Revised Code and such
other rights and remedies as are
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<PAGE> 16
granted to a secured party in similar situations to the extent of
the security interest granted under paragraph (a) above.
(g) The Borrower shall be liable for the deficiency if the
proceeds of any sale or other disposition of the Custody Bonds by the
Bank are insufficient to pay all amounts to which the Bank is
entitled, including principal and interest as provided herein, and the
reasonable fees of any outside attorneys employed by the Bank to
collect such deficiency.
5.7 Reinstatement.
(a) In connection with any Tender Draft, upon (1)(i) receipt by
the Bank or the Trustee of immediately available funds in an amount
equal to the principal amount of the Bonds that have been remarketed
in accordance with Section 4.01 of the Trust Indenture, and (ii)
receipt by the Bank from the Trustee of a certificate with respect to
such reinstatement in the form of Annex 5 attached to the Letter of
Credit, or (2) Bonds for the Bank's benefit in the aggregate principal
amount equal to the unpaid amount of the principal portion of such
Tender Draft delivered by the Borrower or on its behalf, registered or
recorded in the name of the Borrower as pledgor and the Bank as
pledgee in accordance with Section 5.6 hereof, or (3) the Bank's
otherwise advising the Trustee in writing that such reinstatement
shall occur, as provided in the Letter of Credit, the Trustee's right
to draw on the Letter of Credit shall automatically be reinstated in
an amount equal to the principal portion plus the interest portion of
such Tender Draft, or the aggregate principal amount of such Bonds
plus the interest portion of such Tender Draft, as the case may be.
(b) In the event of an Interest Draft, the Stated Amount shall
automatically be reinstated in the amount of the related Interest
Draft at the close of business on the fifteenth day following the date
of such draft unless the Bank shall have delivered to the Trustee a
written notice specifically referring to the Letter of Credit stating
that an Event of Default has occurred under this Agreement and is
continuing and that such reinstatement shall not occur.
6. Events of Default and Remedies Upon Default.
6.1 Events of Default. The occurrence of any one or more of the
following, whatever the reason therefor, shall constitute an Event of Default
hereunder:
(a) The Borrower shall fail to pay any amount of principal,
purchase price or interest or any other sum owing under this Agreement
or any other Letter of Credit Document on the due date thereof; or
(b) An Event of Default occurs and is existing under the Loan
Agreement.
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<PAGE> 17
6.2 Remedies Upon Default. Upon the occurrence of any Event of Default, in
addition to and not in lieu of all rights and remedies available to the Bank
under the Loan Agreement and the other agreements and documents executed in
connection therewith, in law or at equity, the Bank may, at its option, do any
or all of the following:
(a) Declare the principal of all amounts owing under this
Agreement and the other Letter of Credit Documents (including all
obligations secured by the Security Documents) and all other
indebtedness of the Borrower to the Bank, together with interest
thereon, to be forthwith due and payable, regardless of any other
specified maturity or due date, without notice of default, presentment
or demand for payment, protest or notice of nonpayment or dishonor, or
other notices or demands of any kind or character, and without the
necessity of prior recourse to any security;
(b) Implement any remedies available to the Bank under or in
connection with the Bond Documents, including without limitation
instructing the Trustee, in the Bank's sole discretion, to accelerate
the maturity of the Bonds and causing and paying a full or partial
drawing under the Letter of Credit (whether or not any amounts have
previously been paid under the Letter of Credit) and exercising all of
the rights and remedies available to the Bank in connection therewith;
(c) If the Event of Default may be cured by the Bank by taking
actions or making payments of money, the Bank shall have the right
(but not the obligation) to take such actions (including without
limitation the retention of attorneys and the commencement or
prosecution of actions on its own behalf or on behalf of the
Borrower), and to make such payments and pay for the costs of such
actions (including without limitation attorneys' fees and court costs)
from its own funds; provided, that the taking of such actions at the
Bank's expense or the making of such payments by the Bank out of the
Bank's own funds shall not be deemed to cure such Event of Default,
and the same shall not be so cured unless and until the Borrower shall
have reimbursed the Bank, for such payment, together with interest at
the Prime Rate plus two percent (2%), from the date of such payment
until the date of reimbursement. If the Bank advances its own funds
for such purposes, such funds shall be secured by the Security
Documents, notwithstanding that such advances may cause the total
amount advanced hereunder to exceed the amount committed to be
advanced pursuant to this Agreement, and the Borrower shall
immediately upon demand reimburse the Bank therefore with interest at
the Prime Rate plus two percent (2%), from the date of such advance
until the date of reimbursement; and
(d) Exercise any and all of its rights under the Letter of Credit
Documents, the Loan Agreement or the other agreements and documents
executed in connection therewith, or the Bond Documents, or otherwise
as a secured creditor, including, without limitation, foreclosing on
any security, and exercising any other rights with respect to security
whether under the Security Documents or any other agreement
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<PAGE> 18
or as provided by law, all in such order and in such manner as the
Bank in its sole discretion may determine.
6.3 Cumulative Remedies; No Waiver. All remedies of the Bank provided for
herein are cumulative and shall be in addition to any and all other rights and
remedies provided in the Letter of Credit, the Security Documents, the Bond
Documents, any of the Letter of Credit Documents or the Loan Agreement or the
other agreements and documents executed in connection with the Loan Agreement,
or provided by law from time to time. The exercise of any right or remedy by
the Bank hereunder shall not in any way constitute a cure or waiver of default
hereunder or under the Letter of Credit, the Security Documents, the Bond
Documents, any of the Letter of Credit Documents, or the Loan Agreement or the
other agreements and documents executed in connection with the Loan Agreement,
nor invalidate any notice of default or any act done pursuant to any such
notice, nor prejudice the Bank in the exercise of any rights hereunder or under
the Letter of Credit, the Security Documents, the Bond Documents, the Letter of
Credit Documents or the Loan Agreement, unless in the exercise of said right,
the Bank realizes all amounts owed to it under the Letter of Credit, this
Agreement, the Security Documents, the Bond Documents, the Letter of Credit
Documents, the Loan Agreement and the other agreements and documents executed
in connection with the Loan Agreement, and all Events of Default are cured. No
waiver by the Bank of any default or breach by the Borrower hereunder shall be
implied from any omission by the Bank to take action on account of such default
if such default persists or is other than the default expressly made the
subject of the waiver. Any such express waiver shall be operative only for
the time and to the extent therein stated. Any waiver of any covenant, term or
condition contained herein shall not be construed as a waiver of any subsequent
breach of the same covenant, term or condition. The consent or approval by the
Bank to or of any act by the Borrower shall not be deemed to waive or render
unnecessary consent or approval to or of any subsequent act.
7. Miscellaneous.
7.1 Nonliability of the Bank. The Borrower acknowledges and agrees that:
(a) The Bank shall not be responsible or liable to the Borrower
for the use which may be made of the Letter of Credit or for any acts
or omissions of the Trustee and any beneficiary or transferee in
connection therewith;
(b) The Bank shall not be responsible or liable to the Borrower
for the validity, sufficiency or genuineness of documents (except as
to the Bank's signatures thereon), or of any endorsements thereon,
even if such documents should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent, or forged
(except to the extent acceptance or reliance upon such documents is a
result of the Bank's gross negligence or willful misconduct); and
(c) The Bank shall not be responsible or liable to the Borrower
as a result of any circumstances in any way related to the making or
failure to make payment
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<PAGE> 19
under the Letter of Credit, other than as a result of the gross
negligence or willful misconduct of the Bank.
7.2 No Representations by the Bank. By accepting or approving anything
required to be observed, performed or fulfilled, or to be given to the Bank
pursuant to this Agreement or any of the other Letter of Credit Documents or
Bond Documents, including any certificate, statement of profit and loss or
other financial statement, survey, appraisal or insurance policy, the Bank
shall not be deemed to have warranted or represented the sufficiency, legality,
effectiveness or legal effect of the same, or of any term, provision or
condition thereof, and such acceptance or approval thereof shall not be or
constitute any warranty or representation to anyone with respect thereto by the
Bank. The Bank may accept documents in connection with the Letter of Credit or
any of the other Letter of Credit Documents or Bond Documents which appear on
their face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary.
7.3 No Third Parties Benefitted. This Agreement is made for the purpose of
defining and setting forth certain obligations, rights and duties of the
Borrower and the Bank in connection with the Letter of Credit. It is made for
the sole protection of the Borrower and the Bank, and the Bank's successors and
assigns. No other Person shall have any rights of any nature hereunder or by
reason hereof.
7.4 Indemnity by the Borrower. The Borrower hereby indemnifies and holds
harmless the Bank and its directors, officers, agents and employees
(collectively the "indemnitees") from and against:
(a) any and all claims, demands, actions or causes of action that
are asserted against any indemnitee by any Person if the claim,
demand, action or cause of action directly or indirectly relates to a
claim, demand, action or cause of action that the Person has or
asserts against the Borrower, whether in connection with the Letter of
Credit, the Bonds, any of the Bond Documents, any of the Letter of
Credit Documents or this Agreement, or otherwise;
(b) any and all claims, demands, actions or causes of action that
are asserted against any indemnitee by any Person and arising from or
in connection with (I) any statement or omission, actual or alleged,
in the Bond Documents, or (ii) any breach or default, actual or
alleged, of the representations, warranties, covenants, conditions or
agreements contained in this Agreement or any of the other Letter of
Credit Documents or in any of the Bond Documents; and
(c) any and all liabilities, losses, costs or expenses (including
court costs and attorneys' fees) that any indemnitee suffers or incurs
as a result of the assertion of any claim, demand, action or cause
of action specified in Section 7.4(a) or Section 7.4(b) of this
Agreement.
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<PAGE> 20
Any obligation or liability of the Borrower to any indemnitee as provided
in this Section 7.4 shall be secured by the Security Documents. The indemnity
contained in this Section 7.4 shall not extend to any claims, demands, actions,
causes of action, liabilities, losses, costs or expenses which result solely
from the gross negligence or willful misconduct of the Bank.
7.5 Commissions. The Borrower hereby indemnifies and holds the Bank
harmless from any responsibility, cost and/or liability, including any
attorneys' fees incurred, in connection with any claim by any Person for the
payment of any commission, charge or brokerage fee in connection with the Bonds
or any of the other transactions contemplated in connection with this Agreement
arising by virtue of any action taken, directly or indirectly, by the Borrower.
7.6 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the Borrower and the Bank and their respective successors and
assigns, subject to the provisions of Article 6 of the Loan Agreement.
7.7 Execution in Counterparts. This Agreement and any other Letter of
Credit Document may be executed in any number of counterparts and any party
hereto or thereto may execute any counterpart, each of which when executed and
delivered will be deemed to be an original and all of which counterparts of
this Agreement or any other Letter of Credit Document, as the case may be,
taken together will be deemed to be but one and the same instrument. The
execution of this Agreement or any other Letter of Credit Document by any party
hereto or thereto will not become effective until counterparts hereof or
thereof, as the case may be, have been executed by all the parties hereto or
thereto.
7.8 Amendments; Consents. No amendment, modification, supplement,
termination or waiver of any provision of this Agreement or any of the Letter
of Credit Documents, and no consent to any departure by the Borrower therefrom,
may in any event be effective unless in writing signed by the Bank, and then
only in the specific instance and for the specific purpose given.
7.9 Cumulative Remedies; No Waiver. The rights, powers and remedies of the
Bank under the Letter of Credit Documents are cumulative and not exclusive of
any right, power or remedy provided by law or equity or otherwise. No failure
or delay on the part of the Bank in exercising any right, power or remedy may
be, or may be deemed to be, a waiver thereof; nor may any single or partial
exercise of any right, power or remedy preclude any other or further exercise
of any other right, power or remedy.
7.10 Survival of Representations and Warranties. All representations and
warranties of the Borrower contained herein or in the Loan Agreement or any
other Letter of Credit Document will survive the delivery of the Letter of
Credit, and are material and have been or will be relied upon by the Bank,
notwithstanding any investigation made by the Bank or on behalf of the Bank.
For the purpose of the foregoing, all statements contained in any
-17-
<PAGE> 21
certificate, agreement or other writing delivered by or on behalf of the
Borrower pursuant hereto or pursuant to the Loan Agreement or any other Letter
of Credit Document or in connection with the transactions contemplated hereby
or thereby shall be deemed to be covenants, representations and warranties of
the Borrower contained herein or in the Loan Agreement or in any other Letter
of Credit Documents, as the case may be.
7.11 Notices. All notices, requests, demands, directions and other
communications provided for in this Agreement shall be given in the manner
provided for notices in the Loan Agreement.
7.12 Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Ohio.
7.13 Severability of Provisions. Any provision in any Letter of Credit
Document that is held to be inoperative, unenforceable or invalid shall be
inoperative, unenforceable or invalid without affecting the remaining
provisions, and to this end the provisions of all Letter of Credit Documents
are declared to be severable.
7.14 Headings. Article and section headings in this Agreement are included
for convenience of reference only and are not part of this Agreement for any
other purpose.
7.15 Time of the Essence. Time is of the essence for all purposes under
this Agreement and the other Letter of Credit Documents.
7.16 WAIVER OF JURY TRIAL. THE BANK AND THE BORROWER, AFTER CONSULTING OR
HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT EITHER OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY
LITIGATION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY RELATED
INSTRUMENT OR AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREBY, OR
ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR
ACTIONS OF EITHER OF THEM WITH RESPECT THERETO. THIS WAIVER SHALL NOT IN ANY
WAY EFFECT THE BANK'S ABILITY TO PURSUE REMEDIES PURSUANT TO ANY WARRANT OF
ATTORNEY OR COGNOVIT PROVISION CONTAINED HEREIN OR IN ANY RELATED INSTRUMENT OR
AGREEMENT. NEITHER THE BORROWER NOR THE BANK SHALL SEEK TO CONSOLIDATE, BY
COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED
WITH ANY OTHER ACTION WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.
THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR
RELINQUISHED BY EITHER THE BORROWER OR THE BANK EXCEPT BY A WRITTEN INSTRUMENT
EXECUTED BY BOTH OF THEM.
-18-
<PAGE> 22
7.17 Warrant of Attorney. The Borrower authorizes any attorney-at-law to
appear in any Court of Record in the State of Ohio or in any other state or
territory of the United States after the obligations hereunder become due,
whether by acceleration or otherwise, to waive the issuing and service of
process, and to confess judgment against the Borrower in favor of the Bank for
the amount then appearing due, together with costs of suit, and thereupon to
waive all rights of appeal and stays of execution.
IN WITNESS WHEREOF, the Borrower has caused this Agreement to be executed
on its behalf by its duly authorized representative and the Bank has caused
this Agreement to be executed on its behalf by its duly authorized officer as
of the date first above written.
WARNING--BY SIGNING THIS PAPER, YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT
OR ANY OTHER CAUSE.
MCINNES STEEL COMPANY
By: /s/ Timothy M. Hunter
--------------------------------
Title: Secretary/Treasurer
-----------------------------
THE HUNTINGTON NATIONAL
BANK
By: /s/ Bill T. Frazier
--------------------------------
Title: Vice President
-----------------------------
-19-
<PAGE> 23
The Huntington National Bank HUNTINGTON
P.O. Box 1558 BANKS
Columbus, Ohio 43216
Direct Telephone Number EXHIBIT A
IRREVOCABLE LETTER OF CREDIT NO. 106192
February 29, 1996
PNC Bank, National Association, Trustee
901 State Street
Erie, Pennsylvania 16501
Attention: Corporate Trust Department
Dear Sirs:
1. At the request of McInnes Steel Company, a Pennsylvania corporation
(the "Company"), we hereby establish in your favor, as successor to Marine
Bank, Trustee (the "Trustee") under the Trust Indenture dated as of November 1,
1991 (the "Indenture") between the Trustee and Erie County Industrial
Development Authority (the "Issuer"), pursuant to which $6,000,000.00 aggregate
principal amount of Variable Rate Demand Revenue Bonds, Series of 1991 (McInnes
Steel Company Project) (the "Bonds") were issued by the Issuer, our Irrevocable
Letter of Credit No. 106192 (the "Letter of Credit") in the amount of
$4,610,959.00 (as more fully described below), effective immediately and
expiring at 5:00 p.m. on November 6, 1999 or, if such day is not a Business Day
(as defined in the Indenture), on the next succeeding Business Day (the "Stated
Expiration Date"), unless, at our option, we deliver to you a written amendment
signed by an authorized signer (specifically referring to "THE HUNTINGTON
NATIONAL BANK Irrevocable Letter of Credit No.106192") extending the Stated
Expiration Date to the date set forth in such amendment, in which case this
Letter of Credit shall expire on such extended Stated Expiration Date unless
further extended, it being understood that we shall be under no obligation
herein to grant any such extension. This Letter of Credit is subject to
automatic termination as provided in paragraph 8 hereof.
2. We hereby irrevocably authorize you to draw on us in accordance with
the terms and conditions hereinafter set forth, by one or more drafts on us, an
aggregate amount not exceeding Four Million Six Hundred Ten Thousand Nine
Hundred Fifty-Nine and no/100 Dollars ($4,610,959.00) (as reduced and
reinstated from time to time in accordance with the provisions hereof, the
"Letter of Credit Amount"), of which (i) an aggregate amount not exceeding
$4,500,000.00 (as reduced and reinstated from time to time in accordance with
the provisions hereof, the "Principal Component") may be drawn upon with
respect to principal of the Bonds and (ii) an aggregate amount not exceeding
$110.959.00 (as reduced and reinstated from time to time in accordance with the
provisions hereof, the "Interest Component") may be
<PAGE> 24
drawn upon with respect to interest accrued on the Bonds. The Principal
Component shall not THE HUNTINGTON NATIONAL BANK
Irrevocable Letter of Credit No. 106192
Page 2
be available to pay amounts corresponding to the interest on the Bonds, and the
Interest Component shall not be available to pay amounts corresponding to
principal of the Bonds.
3. Funds under this Letter of Credit are available to you at the time
specified below, (a) in one or more drawings by one or more of your drafts,
each dated the date of its presentation and stating on its face: "Drawn under
The Huntington National Bank Irrevocable Letter of Credit No. 106192",
accompanied by one or more of your certificates in the form of Annex 1 attached
hereto appropriately completed and executed (any such draft accompanied by such
certificate being herein called an "Interest Draft"); (b) in one or more
drawings by one or more of your drafts, each dated the date of its presentation
and stating on its face "Drawn under The Huntington National Bank Irrevocable
Letter of Credit No.106192", accompanied by one or more of your certificates in
the form of Annex 2 attached hereto appropriately completed and executed (any
such draft accompanied by such certificate being herein called a "Tender
Draft"); and (c) in one or more drawings by one or more of your drafts, each
dated the date of its presentation and stating on its face "Drawn under The
Huntington National Bank Irrevocable Letter of Credit No.106192 ", accompanied
by one or more of your certificates in the form of Annex 3 attached hereto
appropriately completed and executed (any such draft accompanied by such
certificate being herein called a "Redemption Draft"). Each such draft and
certificate shall be presented at our office at The Huntington National Bank,
41 South High Street, Columbus, Ohio 43287, Attention: International
Department, or such other office of ours that we hereafter designate by written
notice to you, and shall be made either (i) in the form of a letter on your
letterhead manually signed by one of your officers and addressed to us at The
Huntington National Bank, 41 South High Street, Columbus, Ohio 43287,
Attention: International Department, or at any other office of ours that we
hereafter designate by written notice delivered to you, or (ii) in the form of
a tested telex sent by one of your officers, such telex number that may be
designated by us by written notice delivered to you, or (iii) in the form of a
telecopy transmission of the documents described in clause (i) of this sentence
to Telecopier No. (614) 480-4354 pr Telecopier No. (614) 480-3761(with
transmission confirmed by call to Telephone No. (614) 480-4374) or such other
telecopier and telephone numbers that we hereunder designate by written notice
delivered to you. If a drawing is made by telex or telecopier, it must contain
an additional certification by you that originals of the draft and certificate
on your letterhead manually signed by one of your officers will be mailed to us
concurrently by first class United States mail. If we receive your Interest
Draft or Redemption Draft at such office, all in strict conformity with the
terms and conditions of this Letter of Credit at or prior to 9:00 A.M., on a
Business Day, we will honor the same in accordance with your payment
instructions by 12:00 noon on the later of (a) the Business Day on which you
present to us your draft and certificate or (b) the "Value Date" set forth in
such certificate; and if we receive your Interest Draft or Redemption Draft at
such office, all in strict conformity with the terms and conditions of this
Letter of Credit, after 9:00 A.M., on a Business Day, we will honor the
same in accordance with your payment instructions by 12:00 noon on the later of
(1) the Business Day immediately
<PAGE> 25
THE HUNTINGTON NATIONAL BANK
Irrevocable Letter of Credit No. 106192
Page 3
following the Business Day on which you present to us your draft and
certificate or (2) the "Value Date" set forth in such certificate. If we
receive your Tender Draft at such office with respect to Bonds bearing interest
at the Daily Rate (as defined in its Indenture), all in strict conformity with
the terms and conditions of this Letter of Credit, at or prior to 12:00 noon,
on a Business Day, we will honor the same in accordance with your payment
instructions by 2:00 p.m. on the later of (x) the Business Day on which you
present to us your draft and certificate or (y) the "Value Date" set forth in
such certificate; and if we receive your Tender Draft at such office, all in
strict conformity with the terms and conditions of this Letter of Credit, after
12:00 noon, on a Business Day, we will honor the same in accordance with your
payment instructions by 2:00 p.m. on the later of (i) the Business Day
immediately following the Business Day on which you present to us your draft
and certificate or (ii) the "Value Date" set forth in such certificate. If we
receive your Tender Draft at such office with respect to Bonds bearing interest
at the Weekly or Monthly Rate (as such terms are defined in the Indenture), all
in strict conformity with the terms and conditions of this Letter of Credit, at
or prior to 4:00 p.m. on a Business Day, we will honor the same in accordance
with your payment instructions by 10:00 a.m. on the later of (o) the Business
Day immediately following the Business Day on which you present to us your
draft and certificate or (p) the "Value Date" as set forth in such certificate.
For purposes of this Letter of Credit, we shall be deemed to have "honored" a
draft at the time at which we commence a wire transfer of immediately available
funds in accordance with your instructions.
4. As used herein the term "Business Day" means any day other than (i) a
Saturday or Sunday, (ii) a day on which commercial banking institutions in
Columbus, Ohio, Erie, Pennsylvania or New York, New York or in any other city
where your principal office or our office or the principal office of the
Remarketing Agent is located are required or authorized by law (including
executive order) to close or on which any of such offices is closed for a
reason not related to financial conditions. References to any time of day in
this Letter of Credit shall refer to Eastern standard time or Eastern daylight
saving time. as in effect in Columbus, Ohio on such day.
5. Each drawing honored by us hereunder shall reduce the Letter of Credit
Amount and the respective Principal and Interest Components thereof by the
respective amounts of such drawing and the corresponding components of such
drawing. In addition, the Letter of Credit Amount and the respective Principal
and Interest Components thereof shall be reduced automatically, without notice
to you, upon our receipt from you of a certificate in the form of Annex 4
attached hereto appropriately completed and executed, each such reduction to be
(i) in the amounts necessary to reduce the Letter of Credit Amount and the
Principal and Interest Components thereof to the respective amounts specified
by you in such certificate and (ii) effective on the Business Day on which we
receive such certificate from you. No drawing hereunder honored by us shall
exceed the Letter of Credit Amount at the time of such drawing,
<PAGE> 26
as the Letter of Credit Amount has been reduced and reinstated in accordance
with the terms
THE HUNTINGTON NATIONAL BANK
Irrevocable Letter of Credit No. 106192
Page 4
hereof, and no component of any such drawing corresponding to principal of or
interest on the Bonds shall exceed the corresponding Principal and Interest
Component of the Letter of Credit Amount as such Component has been reduced and
reinstated in accordance with the terms hereof.
6. On the fifteenth calendar day following the date of each drawing under
this Letter of Credit by your Interest Draft, the Letter of Credit Amount and
the Interest Component shall be automatically reinstated by an amount equal to
the amount of such drawing, unless before said fifteenth day, we give written
notice specifically referring to "The Huntington National Bank Irrevocable
Letter of Credit No. 106192 " signed by our authorized officer and received by
you, to the effect that an Event of Default has occurred under the
Reimbursement Agreement dated as of February 29, 1996 between the Company and
us and such reinstatement shall not occur, in which case such reinstatement
shall not occur.
7. Following any drawing under this Letter of Credit by your Tender Draft,
the Letter of Credit Amount and the Principal and Interest Components thereof
shall be reinstated with respect to such drawing (a) automatically when and to
the extent that both (i) we have received reimbursement for such drawing in
immediately available funds (or you have received immediately available funds
which, pursuant to Section 4.04 of the Indenture, you will immediately remit to
us as reimbursement for such drawing, such funds to be remitted to the
attention of our International Department stating that they are repayments for
Tender Drafts drawn under The Huntington National Bank Letter of Credit No.
106192) and (ii) you have delivered to us a certificate in respect of such
reinstatement in the form of Annex 5 attached hereto appropriately completed
and executed, which may be sent by tested telex or telecopier in the manner, to
the numbers and with the confirmations and follow-up mailings described in
paragraph 3 of this Letter of Credit or (b) when and to the extent that we, at
our option, upon the Company's request, otherwise advise you in writing that
such reinstatement shall occur, it being understood that we shall have no
obligation to grant any such reinstatement except as provided in clause (a) of
this sentence.
8. This Letter of Credit shall automatically terminate upon the first to
occur of: (a) the Stated Expiration Date (as such date may have been extended),
(b) the date on which we receive a certificate from you in the form of Annex 6
attached hereto, appropriately completed and executed, to the effect that there
are no Bonds Outstanding (as defined in the Indenture) other than bonds secured
by a Replacement Letter of Credit (as defined in the Indenture) or (c) the date
on which the final drawing available hereunder is honored. This Letter of
Credit shall be promptly surrendered to us by you upon such termination. The
Company's election to convert the mode whereby interest is calculated to a
Fixed Rate, and thereafter the actual Conversion,
<PAGE> 27
THE HUNTINGTON NATIONAL BANK
Irrevocable Letter of Credit No. 106192
Page 5
will not effect a termination of this Letter of Credit.
9. This Letter of Credit is transferable in its entirety (but not in part)
to any transferee who you certify to us has succeeded you as Trustee under the
Indenture, and may be successively transferred. Transfer of this Letter of
Credit to such transferee shall be effected by the presentation to us of this
Letter of Credit accompanied by a certificate substantially in the form of
Annex 7 attached hereto appropriately completed and executed.
10. Only you (or a transferee permitted by the terms of this Letter of
Credit) may make drawings under this Letter of Credit. Upon the payment to you
or your account of the amount specified in a draft drawn hereunder, we shall be
fully discharged of our obligation under this Letter of Credit with respect to
such draft, and we shall not thereafter be obligated to make any further
payments under this Letter of Credit with respect to such draft.
11. This Letter of Credit sets forth in full the terms of our undertaking,
and this undertaking shall not in any way be modified, amended, amplified or
limited by reference to any document, instrument or agreement referred to
herein or in which this Letter of Credit is referred to or to which this Letter
of Credit relates, except only the drafts and certificates referred to herein;
and any such reference shall not be deemed to incorporate herein by reference
any document, instrument or agreement, except such drafts and certificates. All
drafts and certificates referred to herein that are presented to us from time
to time shall become an integral part of this Letter of Credit and shall be
binding on any transferee permitted by the terms of this Letter of Credit.
Payment of all drawings honored under this Letter of Credit will be made with
our own funds.
12. This Letter of Credit is subject to the "Uniform Customs and Practice
for Documentary Credits, 1993 Revision, International Chamber of Commerce,
Publication No. 500" (the "Uniform Customs"). This Letter of Credit shall be
deemed a contract made under the laws of the State of Ohio and shall, as to
matters not governed by the UCP, be governed and construed and in accordance
with the laws and said state, without regard to principles of conflicts of law.
Very truly yours,
THE HUNTINGTON NATIONAL BANK
By:_________________________________
Title:______________________________
<PAGE> 28
ANNEX 1 to The Huntington National Bank
Irrevocable Letter of Credit No. 106192
To: The Huntington National Bank
41 South High Street
Columbus, Ohio 43287
Attention: International Department
CERTIFICATE FOR INTEREST DRAWING OF ACCRUED INTEREST
ON VARIABLE RATE DEMAND REVENUE BONDS, SERIES OF 1991
(McINNES STEEL COMPANY PROJECT) ISSUED BY
ERIE COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
The undersigned, a duly authorized officer of PNC BANK, NATIONAL
ASSOCIATION, successor to Marine Bank, TRUSTEE (the "Trustee") under the Trust
Indenture dated as of November 1, 1991 between the Issuer and the Trustee (the
"Indenture") under which the Bonds have been issued, hereby certifies, with
reference to Irrevocable Letter of Credit No.106192 (the "Letter of Credit")
issued by The Huntington National Bank (the "Bank") in favor of the Trustee
(the capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Letter of Credit, or if not so defined
therein, in the Indenture), that:
1. The Trustee is the Trustee under the Indenture for the holders of the
Bonds.
2. This Certificate accompanies a draft in the amount of $____________ by
which the Trustee is making a drawing under the Letter of Credit in respect of
the payment of accrued interest on Bonds, which payment is due on or before
____________ (the "Value Date"). None of such Bonds is a Company Bond or a
Custody Bond as defined in the Indenture.
3. The Trustee has not received a notice from the Bank that reinstatement
of the Letter of Credit in respect of any Interest Draft shall not occur.
4. The amount of the draft accompanying this Certificate (i) is being
drawn against the Interest Component of the Letter of Credit Amount and does
not exceed the Letter of Credit Amount, as reduced and reinstated in accordance
with the terms of the Letter of Credit, or the Interest Component, as reduced
and reinstated in accordance with the terms of the Letter of Credit, (ii) was
computed in accordance with the terms and conditions of the Bonds and the
Indenture, (iii) does not include any amount in respect of interest on Bonds
which was included in any Interest Draft, Tender Draft or Redemption Draft
presented and not dishonored on or prior to the date of this Certificate, and
(iv) shall be applied pursuant to the provisions of the Bonds and the Indenture
to the payment of accrued interest on Bonds which are not Company Bonds or
Custody Bonds.
<PAGE> 29
ANNEX 1 to The Huntington National Bank
Irrevocable Letter of Credit No. 106192
5. If this Certificate and the accompanying draft are initially presented
by telex or telecopier, the originals of such draft and this Certificate on the
Trustee's letterhead manually signed by one of its officers are being mailed to
you concurrently by first class United States mail.
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the day of the ______ day of ____________________ , 19_.
PNC BANK, NATIONAL ASSOCIATION, TRUSTEE
By___________________________________
Name_________________________________
Title__________________________________
<PAGE> 30
ANNEX 2 to The Huntington National Bank
Irrevocable Letter of Credit No. 106192
To: The Huntington National Bank
41 South High Street
Columbus, Ohio 43287
Attention: International Department
CERTIFICATE FOR INTEREST DRAWING IN RESPECT OF PRINCIPAL
AND ACCRUED INTEREST ON VARIABLE RATE DEMAND
REVENUE BONDS, SERIES OF 1991 (McINNES STEEL COMPANY PROJECT)
ISSUED BY ERIE COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
The undersigned, a duly authorized officer of PNC BANK, NATIONAL
ASSOCIATION, successor to Marine Bank, TRUSTEE (the "Trustee") under the Trust
Indenture dated as of November 1, 1991 between the Issuer and the Trustee (the
"Indenture") under which the Bonds have been issued, hereby certifies. with
reference to Irrevocable Letter of Credit No. 106192 (the "Letter of Credit")
issued by The Huntington National Bank (the "Bank") in favor of the Trustee
(the capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Letter of Credit, or if not so defined
therein, in the Indenture), that:
1. The Trustee is the Trustee under the Indenture for the holders of the
Bonds.
2. This Certificate accompanies a draft in the amount of
$_________________ by which the Trustee is making a drawing under the Letter
of Credit in respect of the payment of the purchase price of Bonds,
corresponding to the principal thereof and accrued interest thereon, tendered
for purchase pursuant to the provisions of the Indenture and in the case of
Bonds tendered pursuant to Section 4.01 of the Indenture, not successfully
remarketed by the Remarketing Agent (as defined in the Indenture) with the
purchase price therefor received as required under the terms of the Indenture.
Such Bonds are herein called Tendered Bonds". The purchase price payment for
the Tendered Bonds is due on or before __________________ (the "Value Date").
None of the Tendered Bonds is presently a Company Bond or a Custody Bond as
defined in the Indenture.
3. The amount of the draft accompanying this Certificate is equal to the
sum of (i) $___________________ being drawn against the Principal Component of
the Letter of Credit Amount in respect of the payment of the portion of the
purchase price of the Tendered Bonds corresponding to the principal thereof and
(ii) $________________ being drawn against the Interest Component of the Letter
Of Credit Amount in respect of the portion of the purchase price of the
Tendered Bonds corresponding to accrued interest thereon.
<PAGE> 31
ANNEX 2 to The Huntington National Bank
Irrevocable Letter of Credit No.106192
4. The amount of the draft accompanying this Certificate does not exceed
the Letter of Credit Amount, as reduced and reinstated in accordance with the
terms of the Letter of Credit.
Neither of the components of the amount of the draft set forth in paragraph 3
of this Certificate exceeds the corresponding component of the Letter of Credit
Amount as reduced and reinstated in accordance with the terms of the Letter of
Credit. The amount of the draft accompanying this Certificate (i) was computed
in accordance with the terms and conditions of the Bonds and the Indenture,
(ii) does not include any amount in respect of principal of or interest on the
Bonds which was included in any Interest Draft, Tender Draft or Redemption
Draft presented and not dishonored on or prior to the date of this Certificate
and (iii) shall be applied pursuant to the provisions of the Bonds and the
Indenture, to the payment of purchase price of the Tendered Bonds.
5. If this Certificate and the accompanying sight draft are initially
presented by telex or telecopier, the originals of such draft and this
Certificate on the Trustee's letterhead manually signed by one of its officers
are being mailed to you concurrently by first class United States mail.
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the day of the ______ day of ________________, 19_.
PNC BANK, NATIONAL ASSOCIATION, TRUSTEE
By___________________________________
Name_________________________________
Title__________________________________
<PAGE> 32
ANNEX 3 to The Huntington National Bank
Irrevocable Letter of Credit No. 106192
To: The Huntington National Bank
41 South High Street
Columbus, Ohio 43287
Attention: International Department
CERTIFICATE FOR REDEMPTION OR FINAL PAYMENT DRAWING IN RESPECT OF
PRINCIPAL AND ACCRUED INTEREST ON VARIABLE RATE DEMAND REVENUE
BONDS, SERIES OF 1991 (McINNES STEEL COMPANY PROJECT)
ISSUED BY ERIE COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
The undersigned, a duly authorized officer of PNC BANK, NATIONAL
ASSOCIATION, successor to Marine Bank, TRUSTEE (the "Trustee") under the Trust
Indenture dated as of November 1, 1991 between the Issuer and the Trustee (the
"Indenture") under which the Bonds have been issued, hereby certifies, with
reference to Irrevocable Letter of Credit No.106192 (the "Letter of Credit")
issued by The Huntington National Bank (the "Bank") in favor of the Trustee
(the capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Letter of Credit, or if not so defined
therein, in the Indenture), that:
1. The Trustee is the Trustee under the Indenture for the holders of the
Bonds.
2. This Certificate accompanies a draft in the amount of $________ by
which the Trustee is making a drawing under the Letter of Credit in respect of
the payment of principal of and accrued interest on Bonds (other than Company
Bonds or Custody Bonds as defined in the Indenture) upon the applicable event
indicated in paragraph 3 of this Certificate, which payment is due on or before
_________ (the "Value Date").
3. The Trustee is presenting this Certificate and the accompanying draft
in connection with (check and complete one):
[ ] An optional redemption of the Bonds in the principal
amount of $______ pursuant to Section 9.01 of the
Indenture. After such redemption, $______ principal
amount of the Bonds will remain outstanding and will not
presently be Company Bonds or Custody Bonds.
[ ] A sinking fund redemption of the Bonds in the principal
amount of $______ pursuant to Section 9.05 of the
Indenture. After such redemption, $______ principal
amount of the Bonds will remain outstanding and will not
presently be Company Bonds or Custody Bonds.
<PAGE> 33
ANNEX 3 to The Huntington National Bank
Irrevocable Letter of Credit No. 106192
[ ] The payment of the Bonds upon acceleration of the
maturity thereof pursuant to Section 11.02 of the
Indenture.
[ ] The payment of the Bonds at final maturity thereof
pursuant to Section 6.02 of the Indenture.
4. The amount of the draft accompanying this Certificate is equal to the
sum of (i) $________ being drawn against the Principal Component of the Letter
of Credit Amount in respect of the principal of Bonds (other than Bonds which
are presently Company Bonds or Custody Bonds) and (ii) $________ being drawn
against the Interest Component of the Letter of Credit Amount in respect of
interest accrued on such Bonds.
5. The amount of the draft accompanying this Certificate does not exceed
the Letter of Credit Amount, as reduced and reinstated in accordance with the
terms of the Letter of Credit. Neither of the components of the amount of the
draft set forth in paragraph 4 of this Certificate exceeds the corresponding
component of the Letter of Credit Amount, as reduced and reinstated in
accordance with the terms of the Letter of Credit. The amount of the draft
accompanying this Certificate (i) was computed in accordance with the terms and
conditions of the Bonds and the Indenture. (ii) does not include any amount in
respect of principal of or interest on the Bonds which was included in any
Interest Draft, Tender Draft or Redemption Draft presented and not dishonored
on or prior to the date of this Certificate, and (iii) shall be applied
pursuant to the provisions of the Bonds and the Indenture to the payment of the
principal of and accrued interest on Bonds which are not Company Bonds or
Custody Bonds.
6. If this Certificate and the accompanying draft are initially presented
by telex or telecopier, the originals of such draft and this Certificate on the
Trustee's letterhead manually signed by one of its officers are being mailed to
you concurrently by first class United States mail.
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the day of the ______ day of _______________, 19_.
PNC BANK, NATIONAL ASSOCIATION, TRUSTEE
By___________________________________
Name_________________________________
Title__________________________________
<PAGE> 34
ANNEX 4 to The Huntington National Bank
Irrevocable Letter of Credit No 106192
To: The Huntington National Bank
41 South High Street
Columbus, Ohio 43287
Attention: International Department
CERTIFICATE FOR REDUCING THE HUNTINGTON NATIONAL BANK (THE "BANK")
IRREVOCABLE LETTER OF CREDIT NO.106192 (THE "LETTER OF CREDIT")
SUPPORTING VARIABLE RATE DEMAND REVENUE BONDS, SERIES OF 1991
(McINNES STEEL COMPANY PROJECT)
ISSUED BY ERIE COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
The undersigned, a duly authorized officer of PNC BANK, NATIONAL
ASSOCIATION, successor to Marine Bank. TRUSTEE (the "Trustee") under the Trust
Indenture dated as of November 1, 1991 between the Issuer and the Trustee (the
"Indenture") under which the Bonds have been issued. hereby certifies that (the
capitalized terms used herein and not defined herein shall have the meanings
ascribed to them in the Letter of Credit, or if not so defined therein, in the
Indenture):
1. The Trustee is the Trustee under the Indenture for the holders of the
Bonds
2. Pursuant to the provisions of the Bonds and the Indenture $________
principal amount of the Bonds have been redeemed or are deemed to have been
paid pursuant to Article XVII of the Indenture, and the remaining aggregate
principal amount of the Bonds Outstanding is $________
3. Pursuant to the terms of the Letter of Credit, the Bank is hereby
directed to reduce the Letter of Credit Amount and the Principal and Interest
Components thereof, effective on the Business Day on which you receive this
Certificate, so that after such reduction the Letter of Credit Amount shall be
$________ of which $________ shall be the Principal Component and $________
shall be the Interest Component (calculated on the basis of 60 days interest on
the Outstanding Bonds and a 365-day year, at an assumed maximum interest rate
of 15% per annum).
4. If this Certificate is initially presented by telex or telecopier, the
originals of this Certificate on the Trustee's letterhead manually signed by
one of its officers are being mailed to you concurrently by first class United
States mail.
<PAGE> 35
ANNEX 4 to The Huntington National Bank
Irrevocable Letter of Credit No. 106192
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the day of the ______ day of ________________, 19_.
PNC BANK, NATIONAL ASSOCIATION,
TRUSTEE
By___________________________________
Name_________________________________
Title__________________________________
<PAGE> 36
ANNEX 5 to The Huntington National Bank
Irrevocable Letter of Credit No. 106192
To: The Huntington National Bank
41 South High Street
Columbus, Ohio 43287
Attention: International Department
CERTIFICATE FOR REINSTATING THE HUNTINGTON NATIONAL BANK (THE
("BANK") IRREVOCABLE LETTER OF CREDIT NO. 106192 (THE "LETTER OF
CREDIT") SUPPORTING VARIABLE RATE DEMAND REVENUE BONDS, SERIES OF
1991 (McINNES STEEL COMPANY PROJECT) ISSUED BY
ERIE COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
The undersigned, a duly authorized officer of PNC BANK, NATIONAL
ASSOCIATION, successor to Marine Bank. TRUSTEE (the "Trustee") under the Trust
Indenture dated as of November 1, 1991 between the Issuer and the Trustee (the
"Indenture") under which the Bonds have been issued, hereby certifies that (the
capitalized terms used herein and not defined herein shall have the meanings
ascribed to them in the Letter of Credit. or if not so defined therein, in the
Indenture):
1. The Trustee is the Trustee under the Indenture for the holders of the
Bonds.
2. On the date of this Certificate $_____________ aggregate principal
amount of Bonds are being purchased upon a remarketing thereof by the
Remarketing Agent (as defined in the Indenture). All of such Bonds were
heretofore purchased (or anticipated to be purchased) with the proceeds of one
or more Tender Drafts in the total drawing amount, of $________________ of
which proceeds $___________ was drawn in respect of principal of such Bonds and
$________ was drawn in respect of accrued interest on such Bonds. Prior to the
date of this Certificate there has been no reinstatement of the Letter of
Credit Amount with respect to amounts drawn by such Tender Drafts to purchase
such Bonds.
3. The Paying Agent has received for immediate payment (or repayment) to
the Bank in respect of the Bonds described in paragraph 2 of this Certificate
the total amount of $________, consisting of $_______________ from the
Remarketing Agent, $________________ from the Company and $_________ from the
Bank. Such total amount is being paid to the Bank at the above address with
reference to Letter of Credit No.106192, pursuant to Section 4.04 of the
Indenture, as reimbursement for amounts drawn under the Letter of Credit by the
Tender Drafts described in paragraph 2 of this Certificate; provided that,
unless such reimbursement is being made on the same day that payment of such
Tender Drafts was received by the Trustee from the Bank, the Trustee will
release the Bonds described in paragraph 2 of this Certificate for remarketing
and will make such payment to the Bank only upon receipt by the Trustee of
telephonic confirmation from the Bank of the reinstatement described in
paragraph 6 below. Such confirmation shall be made to the Trustee at (814)
871-9314, Attention: Corporate Trust
<PAGE> 37
ANNEX 5 to The Huntington National Bank
Irrevocable Letter of Credit No. 106192
Department (which confirmation shall thereafter be sent in writing to the
Trustee at its address on file with you).
4. Of the total amount referred to in paragraph 3 of this Certificate,
$________ represents the aggregate principal amount of Bonds described in
paragraph 2 of this Certificate and $________ represents accrued interest on
such Bonds.
5. Payment of the total amount referred to in paragraph 3 of this
Certificate, together with other amounts heretofore paid to the Bank by or on
behalf of the Company, represents reimbursement for the entire outstanding
balance of all amounts drawn in respect of the Bonds described in paragraph 2
of this Certificate. The foregoing certification is made in reliance upon
representations by the Company and/or the Bank to the Trustee that, upon
payment of such amounts, the Bank will be fully reimbursed for all Tender
Drafts (or allocable portions thereof) presented to the Bank to purchase such
Bonds. No Certification is made by the Trustee as to the payment of interest
accrued pursuant to the Reimbursement, Credit and Security Documents described
in the Letter of Credit on the amounts drawn by such Tender Drafts.
6. Pursuant to paragraph 7 of the Letter of Credit, the Letter of Credit
Amount shall be automatically reinstated by an amount equal to $__________
(which does not exceed the aggregate amount of the Tender Drafts, or allocable
portions thereof, paid by the Bank to purchase such Bonds) of which $_________
(which does not exceed the aggregate amount of such Tender Drafts, or
allocable portions thereof, drawn against the Principal Component) shall be
applied to the Principal Component and $__________ (which does not exceed the
aggregate amount of such Tender Drafts, or allocable portions thereof, drawn
against the Interest Component) shall be applied to the Interest Component.
7. If this Certificate is initially presented by telex or telecopier, the
original of this Certificate on the Trustee's letterhead manually signed by one
of its officers is being mailed to you concurrently by first class United
States mail.
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the day of the ______ day of ________________ , 19_.
PNC BANK, NATIONAL ASSOCIATION, TRUSTEE
By___________________________________
Name_________________________________
Title__________________________________
<PAGE> 38
ANNEX 6 to The Huntington National Bank
Irrevocable Letter of Credit No.106192
To: The Huntington National Bank
41 South High Street
Columbus, Ohio 43287
Attention: International Department
CERTIFICATE FOR TERMINATING THE HUNTINGTON NATIONAL BANK (THE
"BANK") IRREVOCABLE LETTER OF CREDIT NO.106192 (THE "LETTER OF CREDIT")
SUPPORTING VARIABLE RATE DEMAND REVENUE BONDS, SERIES OF 1991
(McINNES STEEL COMPANY PROJECT) ISSUED BY
ERIE COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
The undersigned, a duly authorized officer of PNC BANK, NATIONAL
ASSOCIATION, successor to Marine Bank, TRUSTEE (the "Trustee") under the Trust
Indenture dated as of November 1, 1991 between the Issuer and the Trustee (the
"Indenture") under which the Bonds have been issued, hereby certifies that (the
capitalized terms used herein and not defined herein shall have the meanings
ascribed to them in the Letter of Credit, or if not so defined therein, in the
Indenture):
1. The Trustee is the Trustee under the Indenture for the holders of the
Bonds.
2. Pursuant to the Indenture and the Letter of Credit, the Letter of
Credit shall be terminated on the date the Bank receives this Certificate, and
the Trustee is herewith surrendering the Letter of Credit for cancellation,
because no Bonds remain outstanding other than Bonds secured by a replacement
Letter of Credit.
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the day of the _______ day of _______________, 19_.
PNC BANK, NATIONAL ASSOCIATION, TRUSTEE
By___________________________________
Name_________________________________
Title__________________________________
<PAGE> 39
ANNEX 7 to The Huntington National Bank
Irrevocable Letter of Credit No. 106192
To: The Huntington National Bank
41 South High Street
Columbus, Ohio 43287
Attention: International Department
Re: The Huntington National Bank
Irrevocable Letter of Credit
No. 106192
Gentlemen:
For value received, the undersigned beneficiary hereby irrevocably
transfers to:
(Name of Transferee)
(Address)
all rights of the undersigned beneficiary to draw under the above Letter of
Credit in its entirety. Said transferee has succeeded to the undersigned,
successor to Marine Bank, as Trustee under the Trust Indenture dated as of
November 1, 1991 between Erie County Industrial Development Authority and
Marine Bank, as Trustee.
By this transfer, all rights of the undersigned beneficiary in such Letter
of Credit are transferred to the transferee and the transferee shall have the
sole rights as beneficiary thereof, including sole rights relating to any
amendments whether increases or extensions or other amendments and whether now
existing or hereafter made. All amendments are to be advised direct to the
transferee without necessity of any consent of or notice to the undersigned
beneficiary.
The original of such Letter of Credit is returned herewith, and in
accordance therewith we ask you to transfer the Letter of Credit to the
transferee in the Letter of Credit Amount (as defined in the Letter of Credit)
with provision for reinstating or increasing the Letter of Credit Amount with
respect to all drawings by Interest Drafts and Tender Drafts (as defined in the
<PAGE> 40
Letter of Credit) with respect to which the Letter of Credit Amount of the
original Letter of Credit may be reinstated, and forward it directly to the
transferee with your customary notice of transfer.
Very truly yours,
SIGNATURE AUTHENTICATED PNC BANK, NATIONAL ASSOCIATION,
TRUSTEE
__________________________ By___________________________________
__________________________ Title__________________________________
(Authorized Signature)
<PAGE> 41
EXHIBIT B
PROJECT FACILITIES
The Project Facilities consist in part of a one-story 29,955 square foot
building and related furnishings, machinery and equipment now or hereafter to
be incorporated into said building as constructed on approximately 6.5 acres of
land, located in the City of Erie, Erie County, Pennsylvania. Such land on
which such building is located is more fully described in Exhibit B-1 attached
hereto.
The following is an itemization of the Project Facilities furnishings,
machinery and equipment components as the same were identified as part of the
Project Facilities at the time of initial acquisition:
Machinery, Fixtures and Equipment, including, but not limited to:
Ring Mill: - The Ring Mill is a Wagner, Type RAW 63/63 - 1600/315, radial
axial rolling machine, custom engineered to McInnes specification. The machine
is computer controlled, has an axial and radial rolling force of 63 metric tons
and is capable of rolling seamless rings with an outside diameter ranging from
100 mm - 1600 mm (4" - 63"), ring height from 20 mm - 315 mm (1 " - 12") and a
maximum ring weight of 630 KG (1,400 lbs.)
Hydraulic Press - The Hydraulic Press is an open die forging - ring
preform press and will be utilized in preforming blanks for the Ring Mill. The
Press is a four column, push down of moving cylinder design with a capacity of
1,200 U.S. tons to 1,800 U.S. tons. Ring blanks prepared on this press will
typically weigh 10 KG (25 lbs.) and greater.
Mechanical Press - The Mechanical Press is a 1,600 U.S. ton to 2,500 U.S.
ton forging press that will be utilized in preforming ring blanks for the Ring
Mill in the smaller than 10 KG (25 lbs.) size range.
Forge Furnaces - To support the flexibility of the Wagner Ring Mill four
Forge Furnaces were needed.
Heat Treat Furnaces - Two Heat Treat Furnaces were initially budgeted to
handle several heat treat cycles. The design parameters were based on a single
car bottom style furnace, with a working chamber size of 72 inches width, 144
inches depth and 36 inches in height. Temperatures to 1,500 degrees Fahrenheit
can be expected with heat uniformity of +/- 15 degrees Fahrenheit.
Electrical Service Upgrades - Two Transformers were required for the
building.
<PAGE> 42
The transformers have been sized to provide current and future anticipated
demands. The 12,500 volt primary service was stepped down to two secondary
services through the respective transformers, one being 4,160 volts, 2,000 KVA
and the second a 480 volt, 1,500 KVA service.
TOGETHER with all additions thereto, substitutions therefor, replacements
thereof, and proceeds thereof, and together also with all other fixtures,
furnishings, machinery and equipment of whatever description hereinafter
incorporated into, becoming a part of or erected upon the aforesaid 6.5 acres
of land and the building constructed thereon so as to constitute a complete and
assembled economic unit and manufacturing facility.
B-2
<PAGE> 1
EXHIBIT 4.10
INSTALLMENT SALE AGREEMENT
Between
ERIE COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
and
McINNES STEEL COMPANY
and
ASSIGNMENT
to
MARINE BANK, as Trustee
Dated as of November 1, 1991
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Recitals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
Definitions
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Rules of Construction; Time of Day . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE II
Representations and Findings
Section 2.1 Company Representations . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.2 Issuer Representations and
Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III
Acquisition and Construction of Project Facilities
Section 3.1 Transfer of Project Facilities; Possession and Quiet Enjoyment
by Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.2 Contracts for Project Facilities . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.3 Provisions with Respect to Title . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.4 Description of Project Facilities . . . . . . . . . . . . . . . . . . . . . 8
Section 3.5 Notices and Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.6 Additions and Changes to Project
Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE IV
Financing of Project
Section 4.1 Issuance of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.2 Construction Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.3 Bonds Not to Become Arbitrage Bonds . . . . . . . . . . . . . . . . . . . . 10
Section 4.4 Restriction on Use of Bond Proceeds . . . . . . . . . . . . . . . . . . . . 10
Section 4.5 Three-Year Expenditure Requirement . . . . . . . . . . . . . . . . . . . . . 10
Section 4.6 Completion of Project Facilities;
Excess Bond Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.7 No "Same Issue" Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.8 Fixed Rate Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.9 Election of $10,000,000 Limit . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
-ii-
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE V
Sale and Purchase of Project Facilities
Section 5.1 Sale and Purchase of Project
Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.2 Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.3 Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.4 Acceleration of Payment to Redeem
Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.5 Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.6 Obligations Absolute and
Unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.7 Assignment of Issuer's Rights . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5.8 Conveyance of Title to Company . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VI
Covenants of Company
Section 6.1 Maintenance of Existence . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.2 Maintenance and Operation of
Project Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
section 6.3 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.4 Payment of Compensation
and Expenses of Trustee, Paying Agent and
Remarketing Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 6.5 Payment of Issuer's Fees and
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 6.6 Indemnity Against Claims . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 6.7 Taxes, Other Governmental Charges
and Utility Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 6.8 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 6.9 Damage to or Condemnation of
Project Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.10 Limitation of Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.11 Company's Lease of Project Facilities. . . . . . . . . . . . . . . . . . . . 21
Section 6.12 Granting of Easements . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.13 Recording and Filing Requirements . . . . . . . . . . . . . . . . . . . . . 22
Section 6.14 Restricted and Prohibited Activities . . . . . . . . . . . . . . . . . . . . 23
Section 6.15 Limitation an Capital Expenditures . . . . . . . . . . . . . . . . . . . . . 23
Section 6.16 $40,000,000 Limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.17 Arbitrage Rebate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.18 Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.19 Notice and Certification With
Respect to Bankruptcy Proceedings . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
-iii-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VII
Events of Default and Remedies
Section 7.1 Events of Default; Acceleration . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.2 Payment of Purchase Price on
Default; Suit Therefor . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.3 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 7.4 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 7.5 Rights Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE VIII
Miscellaneous
Section 8.1 Limitation of Liability of Issuer . . . . . . . . . . . . . . . . . . . . . 30
Section 8.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 8.3 Assignment of Company's Rights;
Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 8.4 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 8.5 Term of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 8.6 Amounts Remaining in Funds . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 8.7 No Warranty by Issuer of Condition
Suitability or Zoning of Project . . . . . . . . . . . . . . . . . . . . . 32
Section 8.8 Company's Federal Income Taxation . . . . . . . . . . . . . . . . . . . . . 33
Section 8.9 Survival of Covenants, Conditions
and Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.11 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.12 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.14 Receipt of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Exhibit A - Real Estate Description
Exhibit B - Description of Project Facilities
Exhibit C - Purchase Price Principal Amortization
Assignment
</TABLE>
-iv-
<PAGE> 5
INSTALLMENT SALE AGREEMENT dated as of November 1, 1991 (this "Financing
Agreement" or "Sale Agreement") between ERIE COUNTY INDUSTRIAL DEVELOPMENT
AUTHORITY (the "Issuer"), a public instrumentality and body corporate and
politic of the Commonwealth of Pennsylvania and McINNES STEEL COMPANY (the
"Company"), a Pennsylvania corporation.
It is RECITED as follows:
A. Under the Pennsylvania Industrial and Commercial Development Authority
Law, Act of August 23, 1967, P.L. 251, as amended, including by the Act of
December 29, 1971, P.L. 647 (the "Act"), the Issuer is authorized to enter
into agreements providing for the acquisition, construction and equipping of
industrial and commercial development projects and the sale thereof to
industrial or commercial occupants for the public purposes of promoting the
health, safety and general welfare of the people of the Commonwealth of
Pennsylvania by alleviating unemployment, maintaining employment at a high
level, and creating and developing business opportunities in the Commonwealth
of Pennsylvania.
B. The Issuer has undertaken the financing of costs of a project (the
"Project") involving the acquisition of certain improved industrial real estate
commonly known as 1533 East Twelfth Street, Erie, Erie County, Pennsylvania
and the acquisition of certain machinery and equipment to be installed on
and constructed into such real estate (the "Project Facilities") and the
sale thereof to the Company for use as a manufacturing facility. The
Project Facilities real estate is fully described on Exhibit A hereto, and the
Project Facilities machinery and equipment are as described on Exhibit B
hereto. The Issuer and the Company intend that the Issuer's bonds issued to
finance the Project will constitute an exempt small issue for the purposes of
Section 144(a)(4)(A) of the United States Internal Revenue Code of 1986, as
amended, and rules and regulations promulgated thereunder (collectively the
"Code") so that interest on such bonds will not be included in the gross income
of the recipients thereof for federal income tax purposes.
NOW, THEREFORE, in consideration of the foregoing and intending to be
legally bound, the Issuer and the Company hereby agree as follows:
<PAGE> 6
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. In this Agreement (except as otherwise
expressly provided or unless the context otherwise requires) the following
terms shall have the meanings specified in the foregoing recitals:
Act Company
Financing Agreement Project
Issuer Project Facilities
Code
In addition, the following terms shall have the meanings specified in this
Section, unless the context otherwise requires:
"Agreement" means this Financing Agreement.
"Bank" means Marine Bank, as issuer of the original Letter of Credit, and
any bank or financial institution issuing any replacement Letter of Credit.
"Bond" or "Bonds" means the Issuer's Variable Rate Demand Industrial
Development Revenue Bonds (McInnes Steel Company Project, Series of 1991)
issued under the Indenture in the original aggregate principal amount of
$6,000,000.
"Business Day" means any day other than (i) a Saturday or Sunday, (ii) a
day on which banking institutions in New York, New York or Erie, Pennsylvania,
or in any other city in which the Principal Office of the Trustee, the Paying
Agent, the Remarketing Agent or the Bank, is located, are required or
authorized by law (including executive order) to close or on which the
Principal Office of the Trustee, the Paying Agent, the Remarketing Agent or
the Bank is closed for reasons not related to financial conditions, or (iii) a
day on which the New York Stock Exchange is closed.
"Condemnation Award" means any award or payment (less any expenses,
including attorneys fees, incurred by the Issuer, the Trustee, the Bank or the
Company in connection therewith) which may be made with respect to the Project
Facilities as a result of (i) the taking of all or a portion of the Project
Facilities by the exercise of the right of eminent domain by any governmental
body, or by any person, firm or corporation acting under governmental authority
(or a bona fide sale in lieu of such taking) or (ii) the alteration of the
grade of any street.
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"Contracts" means the contracts and purchase orders awarded by the Company
pursuant to Section 3.2.
"Cost" or "Costs" means any costs of or in respect to the project or the
Project Facilities now or hereafter permitted under the Act. Without limiting
the generality of the foregoing, such costs may include: (i) amounts payable
to contractors and suppliers (including fees for designing Project Facilities
where the designs are provided by the contractor or supplier); (ii) costs of
labor, services, materials, supplies and equipment furnished by the Company
(including shipping costs) plus the Company's standard overhead charge; (iii)
architectural, engineering, legal and other professional fees, marketing costs
and brokerage commissions; (iv) interest on the Bonds to the extent permitted
by the Act; and (v) costs of financing, including but not limited to bond
discount, printing expense, mortgage taxes and recording fees, Trustee, Paying
Agent and Remarketing Agent fees accrued prior to completion of the Project
Facilities, and legal and accounting fees.
"Event of Default" means any of the events described in Section 7.1.
"Force Majeure" means any cause, circumstance or event not reasonably
within the control of the Company, including, without limitation, the
following: acts of God; strikes, lockouts or other industrial disturbances; acts
of public enemies; orders or restraints of any kind of the government of the
United States or of the State or any of their departments, agencies, political
subdivisions or officials, or any civil disturbances; riots; epidemics;
landslides; lightning; earthquakes; fires; hurricanes; storms; droughts;
floods; washouts; arrests; restraint of government and people; explosions;
breakage, malfunction or accident to facilities, machinery, transmission pipes
or canals; partial or entire failure of utilities; and shortages of labor,
materials, supplies or transportation.
"Indenture" means the Issuer's Trust Indenture dated as of the date hereof
delivered to the Trustee, as amended or supplemented at the time in question.
"Letter of Credit" means the Bank's Irrevocable Letter of Credit dated
_________________, 1991 and in favor of the Paying Agent, for the account of the
Company, or any substitute therefor or any replacement Letter of Credit or Fixed
Rate Letter of Credit delivered to the Paying Agent pursuant to Section 7.05.
7.07 or 7.09 of the Indenture.
"Mortgage and Security Agreement" means the Mortgage and Security Agreement
dated as of the date hereof delivered by the
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Company and the Issuer to Trustee with respect to the Project Facilities as
security for the Bonds.
"Paying Agent" means the entity appointed as such by the Issuer and
accepting such appointment for the time being pursuant to Article XIII of the
Indenture, initially Bankers Trust Company, New York, New York.
"Purchase Price" means the price to be paid by the Company for the Project
Facilities pursuant to Section 5.3.
"Reimbursement Agreement" means the Reimbursement, Credit and Security
Agreement dated as of the date hereof between the Company and the Bank, as the
same may be amended from time to time and filed with the Trustee and the Paying
Agent, and any agreement of the Company with the Bank issuing a replacement
Letter of Credit setting forth the obligations of the Company to such Bank
arising out of any payments under the replacement Letter of Credit and which
provides that it shall be deemed to be a Reimbursement Agreement for purposes
of the Indenture.
"Remarketing Agent" means Tucker Anthony Incorporated of New York, New
York, and its successors in such capacity as provided in Section 14.01 of the
Indenture.
"State" means the Commonwealth of Pennsylvania.
"Trustee" means Marine Bank, as Trustee, 901 State Street, Erie,
Pennsylvania, and its successors in the trust under the Indenture.
All other capitalized terms used but not otherwise defined in this
Agreement shall have the meanings ascribed to them in the Indenture.
Section 1.2 Rules of Construction; Time of Day. In this Financing
Agreement, unless otherwise indicated, (i) defined terms may be used in the
singular or the plural and the use of any gender includes all genders, (ii) the
words "hereof," "herein," "hereto," "hereby" and "hereunder" refer to this
entire Financing Agreement, and (iii) all references to particular Articles or
Sections are references to the Articles or Sections of this Financing
Agreement. References to any time of the day in this Financing Agreement shall
refer to Eastern Standard Time or Eastern Daylight Saving Time, as in effect in
the City of Erie, Pennsylvania on such day.
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ARTICLE II
REPRESENTATIONS AND FINDINGS
Section 2.1 Company Representations. The Company represents that:
(a) It is a corporation duly organized and existing under the laws of
the Commonwealth of Pennsylvania, and is duly qualified to conduct its business
under the laws of the Commonwealth. The making and performance of this
Financing Agreement on the Company's part have been duly authorized in
accordance with the terms and provisions of the Company's articles of
incorporation and bylaws and will not violate or conflict with any governmental
rule or regulation or with any agreement, instrument or document by which the
Company or any of its properties are bound.
(b) The Company is financially responsible and engaged in industrial
activities in the State requiring substantial capital and creating substantial
employment opportunities, and the Project will promote the purposes of the Act
and the health, safety and general welfare of the people of the State by
alleviating unemployment and maintaining employment at a high level and by
creating and developing business opportunities in the State.
(c) The Company intends to operate the Project as an industrial
development project within the meaning of the Act.
(d) The Project Facilities are located wholly within the City of Erie
in the County of Erie, Pennsylvania, and consist of land or property of a
character subject to allowance for depreciation under Section 167 of the Code.
(e) The proceeds of the Bonds will not exceed the Costs of the
Project.
(f) The Company has acquired or will acquire before they are needed
all permits and licenses and has satisfied or will satisfy all other
requirements necessary for the acquisition, construction, equipping and
operation of the Project Facilities.
Section 2.2 Issuer Representations and Findings. The Issuer hereby
represents and confirms its findings that:
(a) The Issuer is a public body corporate and politic established in
the State pursuant to the Act, is authorized and empowered by the provisions of
the constitution and laws of the
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State (including the Act) and its resolutions dated July 17, 1991 and November
__, 1991 (collectively, the "Resolution") to enter into the transactions
contemplated by this Agreement and to carry out its obligations hereunder. The
Project constitutes and will constitute an industrial development project
within the meaning of the Act.
(b) Based on representations and information furnished to the Issuer
by or on behalf of the Company, the Issuer has found that the Company is
engaged in industrial activities in the State requiring substantial capital
and creating substantial employment opportunities, that the Project will
promote the health, safety and general welfare of the people of the State and
the public purposes of the Act by alleviating unemployment and maintaining
employment at a high level and by creating and developing business
opportunities in the State, and that the Company is financially responsible to
assume its obligations prescribed by this Agreement and the Act.
(c) The Project Facilities are and shall be located wholly within the
boundaries of the County of Erie within the State.
(d) The Project, the issuance of the Bonds and the execution of this
Financing Agreement and the Indenture have been approved by the Issuer at one
or more duly constituted meetings at which a quorum was present and acting.
(e) The Project has been approved (1) by a publicly elected local
official, after a public hearing held upon at least two weeks prior notice, as
required by the Code, and (2) by the State's Secretary of Commerce as required
by the Act.
(f) Except as otherwise permitted by this Financing Agreement, the
Issuer covenants that it has not and will not pledge the income and revenues
derived from this Agreement other than to secure the Bonds and the related
obligations of the Company to the Bank under the Reimbursement Agreement.
ARTICLE III
ACQUISITION AND CONSTRUCTION OF PROJECT FACILITIES
Section 3.1 Transfer of Project Facilities; Possession and Quiet Enjoyment
by Company. Acquisition of or work on certain portions of the Project
Facilities may have been commenced or completed on or before the date the
Issuer issues the Bonds
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pursuant to this Financing Agreement. The Company hereby grants, conveys and
assigns to the Issuer all of its right, title and interest in and to the Project
Facilities. Issuer has requested that the Company at closing and settlement of
the Bonds grant, convey and assign or cause to be granted, conveyed and
assigned, to the Issuer, by deed, bill of sale, lease, assignment, license,
grant of easement or other appropriate instrument, such interests as it may have
in the Project Facilities and such additional rights as the Issuer shall require
in order to comply with the Act, and Company agrees to comply with that request.
The Issuer agrees that so long as no Event of Default hereunder or under the
Indenture has occurred and is continuing, the Company, on performing the
covenants and conditions contained herein, shall and may peaceably and quietly
have, hold, enjoy and possess the Project Facilities free from molestation,
eviction or disturbance by the Issuer or by any other person or persons claiming
the same, by, through or under the Issuer. The Issuer agrees that it will not
create any lien, encumbrance or charge upon the Project Facilities other than
the security intended to be given under the Indenture and the Mortgage and
Security Agreement or the security intended to be given to the Bank to secure
the Company's obligations under the Reimbursement Agreement, and that the Issuer
will not grant any easement, license, right of way or other rights or privileges
in the nature of easements with respect to the Project Facilities, or otherwise
encumber the Project Facilities, without the prior written consent of the
Company.
Section 3.2 Contracts for Project Facilities. The Company has awarded or
will award contracts and purchase orders (collectively, the "Contracts")
covering the acquisition, construction and equipping of the Project Facilities.
Subject to Force Majeure, the Company will proceed diligently with the
acquisition, construction and equipping of the Project Facilities to
completion. The Company will pay all sums required to complete the same to the
extent that the cost thereof is not provided pursuant to this Financing
Agreement and the Indenture. The Company will have full responsibility for
preparing, administering, amending and enforcing the Contracts and litigating
or settling claims thereunder, and will be entitled to all warranties,
guarantees and indemnities provided under the Contracts and by law. Subject to
the provisions of Sections 3.6 and 4.2, the Company may make additions to,
deletions from or changes in the Project Facilities without prior consultation
with the Issuer or the Trustee.
Section 3.3 Provisions With Respect to Title. The Contracts will provide
and it is hereby agreed that title to the improvements and related equipment
included in the Project Facilities shall pass directly from the contractor to
the Issuer, as the materials and equipment constituting the same are
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delivered, erected, installed and/or put in place or as payments are made
to the respective contractors therefor. If a Contract covers work in
addition to work on the Project Facilities, the Company will cause the
contractor thereunder to deliver separate requisitions and invoices to the
Company for the work on the Project Facilities. The Company and the Issuer
agree that all of the Company's right, title and interest in and to the
Project Facilities has vested or will vest in the Issuer as provided in
Section 3.1 and this Section, and that the Issuer's title to the Project
Facilities shall constitute ownership and not a security interest; provided
that the Company alone shall be entitled to deduct all depreciation on, and
take any available tax credits in respect of, the Project Facilities on the
Company's income tax returns.
Section 3.4 Description of Project Facilities. As the acquisition
and construction of the Project Facilities proceeds, and as improvements,
additions, deletions and changes pursuant to Section 3.6 are proposed by
the Company, the Company will supplement the information contained in
Exhibit B to this Agreement by filing with the Issuer and the Trustee,
information showing:
(a) a description of the nature, function and size of
improvements, fixtures and equipment to be included as part of the Project
Facilities;
(b) the contractors performing work on the Project Facilities;
and
(c) the estimated costs of the Project Facilities.
The Company will revise Exhibit B and such supplemental information to
reflect material additions to, deletions from and changes in the Project
Facilities and will notify the Issuer and the Trustee of such modifications
so that the Issuer and the Trustee will be able to ascertain the nature,
location and estimated costs of the facilities covered by this Financing
Agreement.
Section 3.5 Notices and Permits. The Company shall give or cause to
be given all notices and comply or cause compliance with all laws,
ordinances, municipal rules and regulations and requirements of public
authorities applying to or affecting the conduct of the work on the Project
Facilities, and the Company will defend and save the Issuer, its members,
officers, agents and employees, harmless from all fines due to failure to
comply therewith. The Company shall procure or cause to be procured all
permits and licenses necessary for the prosecution of the acquisition and
construction of the Project Facilities.
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Section 3.6 Additions and Changes to Project Facilities. Subject to
the provisions of Sections 4.2 and 6.15 of this Agreement, the Company may,
at its option and at its own cost and expense, at any time and from time
to time, make such improvements, additions and changes to and deletions
from the Project Facilities as it may deem to be desirable for its uses and
purposes, provided that (a) if an addition, deletion or change occurs prior
to completion of the Project Facilities and if such addition, deletion or
change is substantial in relation to the Bonds, then the Company shall have
first obtained and filed with the Issuer and the Trustee an opinion of
counsel qualified by experience to render such an opinion to the effect
that such addition, deletion or change is permitted under the Act and will
not adversely affect the exclusion from gross income of interest on the
Bonds for federal income tax purposes; (b) the Company will obtain the
Issuer's approval of any addition to the Project Facilities not generally
described in Exhibit B on the date of delivery of this Agreement; (c) such
improvements, additions and changes shall constitute part of the Project
Facilities and be subject to the liens and security interests created by
this Financing Agreement and the Mortgage and Security Agreement; and (d)
without the prior written consent of the Issuer and the Trustee, the
Company shall not permit any alienation, removal, demolition, substitution,
improvement, alteration or deterioration of the Project Facilities or any
other act which might impair or reduce the usefulness or value thereof, or
the security provided under this Financing Agreement or the Mortgage and
Security Agreement unless any item of property so removed by the Company
shall be replaced by other property of similar value so that the original
cost of all property so removed from the Project Facilities is never
greater than the original cost of the property replacing the same. Upon
written request of the Company, the Trustee shall execute termination
statements for any filings made to perfect the security interests created
by Section 5.2 for any fixture or item of equipment permanently removed
from the Project Facilities by the Company pursuant to this Section.
ARTICLE IV
FINANCING OF PROJECT
Section 4.1 Issuance of Bonds. In order to finance the Project
Facilities, the Issuer will issue and sell the Bonds up to the maximum
aggregate principal amount of $6,000,000. The Bonds will be issued under
and secured by the Indenture, and will be additionally secured by the
Mortgage and Security Agreement and this Financing Agreement. The Bonds
will be payable solely from payments made by the Company pursuant to the
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terms hereof, or from other moneys available for such purchase under the
terms of the Indenture. The net proceeds of the Bonds shall be deposited as
provided in Section 2.11 of the Indenture.
Section 4.2 Acquisition Fund. The net proceeds of the Bonds
(exclusive of accrued interest, if any) will be deposited in the
Acquisition Fund established under the Indenture for payment of Costs of
the Project upon requisition by the Company as provided in Section 5.02 of
the Indenture. The Company agrees that the sums so requisitioned from the
Acquisition Fund will be used only for the Costs of the Project as set
forth in such requisitions, and will not be used for any other purpose. The
Company shall have the right to enforce payments from the Acquisition Fund
upon compliance with the procedures set forth in Section 5.02 of the
Indenture; provided that during the continuance of an Event of Default as
defined in the Indenture, the Acquisition Fund shall be held for the
benefit of Registered Holders of the Bonds in accordance with the
provisions of the Indenture. In the event of any deletion of facilities
from the Project Facilities prior to the completion of the Project
Facilities, the Company shall restore to the Acquisition Fund the full
amount of any payments theretofore made from the Acquisition Fund on
account of such deleted facilities.
Section 4.3 Bonds Not to Become Arbitrage Bonds. As provided in
Article VIII of the Indenture, the Trustee will invest moneys held by the
Trustee as directed by the Company. The Issuer and the Company hereby
covenant to each other and to the Registered Holders of the Bonds that,
notwithstanding any other provision of this Financing Agreement or any
other instrument, they will neither make nor instruct the Trustee to make
any investment or other use of the Acquisition Fund or other proceeds of
the Bonds which would cause the Bonds to be arbitrage bonds under Section
148 of the Code and the rules and regulations thereunder, and that they
will comply with the requirements of such Section and related Code rules
and regulations throughout the term of the Bonds.
Section 4.4 Restriction on Use of Bond Proceeds. The Company (i)
shall not use or direct the use of moneys from the Acquisition Fund in any
way, or take or omit to take any other action, so as to cause the interest
on any Bonds to become subject to Federal income tax, (ii) shall not use
more than 2% of the proceeds of the Bonds for costs of issuance thereof,
(iii) shall use at least 95% of the proceeds of the Bonds for Costs
constituting land or property of a character subject to an allowance for
depreciation for federal tax purposes within the meaning of Section 167 of
the Code, and (iv) shall not use the proceeds of the Bonds to acquire,
construct or install facilities, the nature of which would cause the
interest on the
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Bonds to be included in gross income of the recipients thereof for federal
income tax purposes.
Section 4.5 Three-Year Expenditure Requirement. Except to the
extent otherwise approved by an opinion of counsel qualified by experience
to render such an opinion furnished by the Company to the Trustee, within
three years of the Series Issue Date of the Bonds, the Company shall have
completed the Project Facilities and caused all of the proceeds of the
Bonds to be expended for Costs of the Project or to be transferred from the
Acquisition Fund to the Bond Fund as described in Section 4.6.
Section 4.6 Completion of Project Facilities; Excess Bond Proceeds.
When the Company certifies to the Trustee and the Issuer, in the manner
provided in Section 5.03 of the Indenture, that the Project Facilities are
complete, any amounts remaining in the Acquisition Fund will be transferred
to the Acquisition Fund Surplus Account in the Bond Fund and applied by the
Trustee in accordance with Section 5.03 of the Indenture. Such application
shall constitute payment of a portion of, and shall be credited against,
the Purchase Price due from the Company to the Issuer as and to the extent
provided in the Indenture. If for any reason the amount in the Acquisition
Fund proves insufficient to pay all Costs of the Project, the Company will
pay the remainder of such Costs.
Section 4.7 No "Same Issue" Bonds. Neither the Company nor any
other principal user of the Project Facilities, nor any related person,
within the meaning of Section 144(a)(3) of the Code, has participated, or
will participate, in the offering for sale or sale of any issue of private
activity bonds within the meaning of Section 141 of the Code, which are or
will be required to be aggregated with the Bonds as part of the "same
issue" within the meaning of Revenue Ruling 81-216, or any subsequently
proposed, temporary or final Treasury Regulations in substitution therefor.
Section 4.8 Fixed Rate Conversion. Subject to and upon compliance
with the applicable provisions of the Indenture, including Sections 3.03
and 4.02 thereof, the rate of interest on the Bonds may be converted to a
Fixed Rate at the direction of the Company. Any and all fees and expenses
in connection with any such conversion shall be paid by the Company.
Section 4.9 Election of $10,000,000 Limit. The Issuer hereby elects
to have the $10,000,000 limit of Section 144(a)(4) of the Code apply to
the Bonds.
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ARTICLE V
SALE AND PURCHASE OF PROJECT FACILITIES
Section 5.1 Sale and Purchase of Project Facilities. The Issuer
hereby agrees to sell to the Company, who hereby agrees to purchase, the
Project Facilities, under and subject to all easements covenants,
reversions, conditions and restrictions existing at the time of conveyance
pursuant to Section 5.8 hereof, for the Purchase Price set forth in Section
5.3 hereof.
Section 5.2 Security.
(a) In order to secure its obligations hereunder, the Company
agrees that the Issuer shall have a security interest in all the Company's
right, title and interest in and to all funds and investments thereof now
or hereafter held by the Trustee or the Paying Agent under the Indenture as
security for the payment of the Bonds, including without limitation any and
all construction funds, debt service funds and other funds (excepting only
the Rebate Fund created by Section 6.05 of the Indenture) and securities
and other instruments comprising investment thereof and interest and other
income derived therefrom held as security for the payment of the Bonds.
The terms of this Section 5.2(a) shall constitute a security agreement
within the meaning of the State Uniform Commercial Code.
(b) As security for the Bonds, the Company and the Issuer shall
execute and deliver the Mortgage and Security Agreement to the Trustee. In
order to secure their obligations thereunder, the Company and Issuer agree
that the Trustee shall have a lien on and security interest in all the
Company's and Issuer's right, title and interest in and to all real estate,
fixtures, furnishings and equipment constituting parts of the Project
Facilities, Exhibits A and B, now owned or hereafter acquired, all
substitutions and replacements therefor, and all proceeds thereof,
including all insurance proceeds. The terms of this Section 5.2(b) shall
constitute a security agreement within the meaning of the State Uniform
Commercial Code.
(c) The Company agrees that its interest in the Project
Facilities and its rights hereunder are and shall be subject to the rights
of the Trustee under the Indenture and the Mortgage and Security Agreement.
Section 5.3 Payment of Purchase Price. The Purchase Price to be
paid by the Company for the Project Facilities will be an amount equal to
the principal of, premium (if any) on and interest on the Bonds. The
Purchase Price shall be payable by
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the Company in installments which, as to amounts and due dates,
substantially correspond to the payments of the principal of, premium (if
any) on and interest on the Bonds, as required by the Indenture. Payments
of installments of such part of the Purchase Price as are attributable to
the interest on the Bonds shall commence on December __, 1991. So as to
assure the Sinking Fund Redemption of the Bonds in accordance with Section
9.__ of the Indenture, payments of installments of the Purchase Price as
are attributable to the principal of the Bonds shall commence on October
31, 1994 and shall be made on the dates and in the amounts as specified and
scheduled on Exhibit C hereof; but provided, however, that in respect to
the payment of the installment of the Purchase Price as is scheduled to be
paid by the Company there shall be, consistent with the provisions of
Section 8.02(c) of the Indenture, a credit to the Company on account of
interest or income received on the investment of moneys in the Bond Fund
under the Indenture. In addition to its obligation hereunder to pay the
Purchase Price, the Company also agrees to pay or cause to be paid to the
Trustee any amount necessary to enable the Paying Agent to effect the
purchase of Bonds tendered for optional or mandatory purchase pursuant to
Article IV of the Indenture to the extent that moneys are not otherwise
available therefor from the proceeds of the remarketing of such Bonds
and/or from drawings on the Letter of Credit. Such installments of
Purchase Price and other payment obligations shall be reduced to the extent
that other moneys are available under the Indenture for such payments by
the Trustee or the Paying Agent and a credit in respect thereof has been
granted pursuant to the terms of the Indenture. It is the intention of the
Issuer and the Company that, notwithstanding any other provision of this
Agreement, the Trustee, as assignee of the Issuer, shall receive funds from
or on behalf of the Company at such times and in such amounts as will
enable the Issuer to meet all of its obligations under the Bonds, including
any such obligations surviving the payment of the Bonds.
Section 5.4 Acceleration of Payment to Redeem Bonds. Whenever the
Bonds are subject to optional redemption pursuant to the Indenture, the
Issuer will, but only upon request of the Company, direct the Trustee and
the Paying Agent to call the same for redemption as provided in the
Indenture. Whenever the Bonds are subject to mandatory redemption pursuant
to the Indenture, the Company will cooperate with the Issuer, the Trustee
and the Paying Agent in effecting such redemption. In the event of any
optional or mandatory redemption of the Bonds, the Company will pay or
cause to be paid on or before the date of redemption an amount equal to the
applicable redemption price as a prepayment of that portion of the Purchase
Price corresponding to the principal of the Bonds to be redeemed, together
with applicable premium (if any) and interest accrued to the date of
redemption.
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Section 5.5 Letter of Credit. Concurrently with the issuance of the
Bonds, the Company shall cause the Letter of Credit to be delivered to the
Paying Agent. The Company may also from time to time cause the Letter of
Credit to be extended or another Letter of Credit to be delivered in
replacement therefor, to the extent permitted by the terms of the
Indenture. It is anticipated that so long as any Letter of Credit is held
by the Paying Agent, all payments of principal of and interest on the Bonds
will be funded from draws on the Letter of Credit and that moneys
representing payments of Purchase Price will be applied to reimburse the
Bank for such draws.
Section 5.6 Obligations Absolute and Unconditional. The obligations
of the Company to make or cause to be made payments of the Purchase Price
shall be absolute and unconditional without defense or set off by reason of
any default by the Contractors under the Contracts or by the Issuer under
this Financing Agreement or under any other agreement between the Company
and the Issuer or for any other reason, including without limitation
failure to complete the Project Facilities, any acts or circumstances that
may constitute failure of consideration, destruction of or damage to the
Project Facilities, commercial frustration of purpose, or failure of the
Issuer to perform and observe any agreement, whether express or implied, or
any duty, liability or obligation arising out of or connected with this
Financing Agreement, it being the intention of the parties that the
payments required of the Company hereunder will be paid in full when due
without any delay or diminution whatsoever. Payments of the Purchase Price
and additional sums required to be paid by or on behalf of the Company
hereunder shall be received by the Issuer or the Trustee as net sums and
the Company agrees to pay or cause to be paid all charges against or which
might diminish such net sums.
Section 5.7 Assignment of Issuer's Rights. As security for the
payment of the Bonds, the Issuer will assign to the Trustee all the
Issuer's rights under this Financing Agreement (except the rights of the
Issuer to receive payments under Sections 6.4 and 6.5 hereof). The Company
consents to such assignment and agrees to make or cause to be made directly
to the Trustee without defense or set-off by reason of any dispute between
the Company and the Trustee, all Purchase Price and other payments required
under Sections 5.3 and 5.4. Whenever the Company is required to obtain the
consent of the Issuer hereunder, the Company shall also obtain the consent
of the Trustee.
Section 5.8 Conveyance of Title to Company. Settlement for the
Project Facilities shall take place on the date of final payment of all
amounts to be paid by or on behalf of the Company
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under the terms of this Financing Agreement and the discharge of the liens
of the Indenture and the Mortgage and Security Agreement (or, at the
Company's election, within 30 days after such payment and release),
provided that no Event of Default has occurred and is continuing and
provided that settlement shall be held only after the Company gives 10 days
prior written notice to the Issuer of said settlement. At settlement, the
Issuer will convey to the Company (or its assignee or nominee), by bill of
sale containing a covenant of special warranty and such other instruments
as may then be necessary, the Project Facilities, excepting, however, any
part of the Project Facilities taken by eminent domain (or conveyed by a
bona fide sale in lieu thereof) during the term of this Financing Agreement
and subject, nevertheless, to all easements, covenants, reversions,
conditions and restrictions existing at the time of the conveyance to the
Issuer pursuant to Section 3.1 or thereafter created or permitted by the
Issuer with the Company's consent or otherwise created under circumstances
beyond the Issuer's control. The Company agrees to pay all charges and
costs including but not limited to legal fees, recording fees, notary fees
and any other similar fees and charges which must be paid in order to
complete settlement and in connection with the conveyance of the interest
of the Issuer in the Project Facilities from the Issuer to the Company
hereunder and, with respect to any security agreement made by the Issuer
with the Company's consent, all security interest termination costs and
fees. The Company agrees that the Issuer shall not be responsible for any
inaccuracies in any settlement sheet in connection with the foregoing.
ARTICLE VI
COVENANTS OF COMPANY
Section 6.1 Maintenance of Existence. The Company will
maintain its existence and its qualification to do business in the
State.
Section 6.2 Maintenance and Operation of Project Facilities.
(a) During the term of this Agreement, the Company will at
its own cost and expense keep and maintain, or cause to be kept and
maintained, in good repair and condition (excepting reasonable wear and
tear) the Project Facilities and all additions and improvements thereto,
and pay, or cause to be paid, any utility charges and other costs and
expenses arising out of its or its tenants' occupancy of the Project
Facilities.
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(b) The Company agrees to timely pay for any improvements to
the Project Facilities lawfully done or lawfully ordered to be done by any
municipal, state or Federal authority and to comply in all material
respects at its own cost and expense with all lawful and enforceable
notices received from public authorities from and after the date hereof,
which affect the Project Facilities and the use and operation thereof,
other than those improvements, orders and notices, the amount, validity or
application of which is at the time being contested, in whole or in part,
in good faith by appropriate proceedings.
(c) The Company will maintain and use the Project Facilities
as a manufacturing facility or, subject to the provisions of Section 6.11,
lease them to tenants for such use and will not use or permit the use of
the Project Facilities in any manner which would result in a violation of
Section 144(a)(8) or Section 147(e) of the Code.
Section 6.3 Compliance With Laws. With respect to the Project
Facilities and any improvements and additions thereto, the Company will at
all times comply with all applicable requirements of federal, state and
local laws and with all applicable requirements of any agency, board or
commission created under the laws of the State or of any other duly
constituted public authority, and will use, and permit the use of, the
Project Facilities only for such purposes as are lawful under the Act;
provided that the Company shall be deemed in compliance with this Section
so long as it is contesting in good faith any such requirement by
appropriate legal proceedings, and is in compliance with the applicable
provisions of the Mortgage and Security Agreement.
Section 6.4 Payment of Compensation and Expenses of Trustee, Paying
Agent and Remarketing Agent. The Company will pay the Trustee's and Paying
Agent's reasonable compensation and expenses under the Indenture, including
all costs of redeeming Bonds thereunder. The Company will also pay the
reasonable compensation of the Remarketing Agent for the performance of its
duties and services under the Indenture and the Remarketing Agreement.
Section 6.5 Payment of Issuer's Fees and Expenses. The Company will
pay the Issuer's standard administration fees and all reasonable expenses,
including without limitation legal and accounting fees, incurred by the
Issuer in connection with the issuance of the Bonds and the performance by
the Issuer of its functions and duties under this Financing Agreement and
the Indenture. The Issuer's standard administration fees in respect of
this Agreement are $30,000.00 payable to the Economic Development
Corporation of Erie County upon the execution and delivery of this
Agreement, plus any amount necessary at the
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execution hereof and on each anniversary of the date hereof so long as any
Bonds remain Outstanding, the same to defray the cost of an annual audit
with respect to the Bonds.
Section 6.6 Indemnity Against Claims. In the exercise of the powers
of the Issuer, the Trustee or the Paying Agent hereunder or under the
Indenture, including (without limitation) the application of moneys, the
investment of funds and the exercise of remedies upon the occurrence of an
Event of Default, neither the Issuer, the Trustee, the Paying Agent nor
their members, directors, officers, employees or agents shall be
accountable to the Company for any action taken or omitted by any of them
in good faith and with the belief that it is authorized or within the
discretion or rights or powers conferred. The Issuer, the Trustee, the
Paying Agent and their members, directors, commissioners, officers,
employees and agents shall be protected in acting upon any paper or
document believed to be genuine, and any of them may conclusively rely upon
the advice of counsel and may (but need not) require further evidence of
any fact or matter before taking any action. No recourse shall be had by
the Company for any claims based hereon or on the Indenture against any
member, director, commissioner, officer, employee or agent of the Issuer,
the Trustee or the Paying Agent alleging personal liability on the part of
such person unless such claims are based upon willful misconduct of such
person. The Company will indemnify and hold harmless the Issuer, the
Trustee, the Paying Agent and each member, director, officer, employee and
agent of the Issuer, the Trustee or the Paying Agent against any and all
claims, losses, damages or liabilities, joint and several, to which the
Issuer, the Trustee, the Paying Agent or any member, director,
commissioner, officer, employee or agent of the Issuer, the Trustee or the
Paying Agent may become subject, insofar as such loses, claims, damages or
liabilities (or actions in respect thereof) arise directly or indirectly
out of the Project or are based upon any other act or omission in
connection with the Project by the Issuer, the Trustee or the Paying Agent,
unless the losses, damages or liabilities arise from the gross negligence
or willful misconduct of the person to be indemnified. In the event any
claim is made or action brought against the Issuer, the Trustee, the
Paying Agent or any member, director, officer, employee or agent of the
Issuer, the Trustee or the Paying Agent, except for claims or actions
brought which arise from the gross negligence or willful misconduct of such
person, the Issuer, the Trustee or the Paying Agent may direct the Company
to assume the defense of the claim and any action brought thereon and pay
all reasonable expenses (including attorney's fees) incurred therein; or
the Issuer, the Trustee or the Paying Agent may assume the defense of any
such claim or action, the reasonable cost (including attorney's fees) of
which shall be paid by the Company upon written request of the Issuer,
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the Trustee or the Paying Agent to the Company. The counsel selected by
the Issuer, the Trustee or the Paying Agent to conduct such defense shall
be approved by the Company, which approval shall not be unreasonably
withheld. The Company may engage its own counsel to participate in
the defense of any such action. The defense of any such claim shall
include the taking of all actions necessary or appropriate thereto.
Section 6.7 Taxes, Other Governmental Charges and Utility Charges.
The Company shall pay, or cause to be paid before the same become
delinquent, all taxes, assessments, whether general or special, and
governmental charges of any kind whatsoever that may at any time be
lawfully assessed or levied against or with respect to the Project
Facilities, including any equipment or related property installed or
brought by the Company therein or thereon (including, without limitation,
any taxes levied upon or with respect to the revenues or income of the
Issuer with respect to the sale of the Project Facilities), and all utility
and other charges incurred in the operation, maintenance, use, occupancy
and upkeep of the Project Facilities. With respect to special assessments
or other governmental charges that lawfully may be paid in installments
over a period of years, the Company shall be obligated to pay only such
installments as are required to be paid during the term hereof. If the
Project Facilities are not taxed because of any interest the Issuer may
have in respect thereof, the Company shall pay to the political
subdivisions in which the Project Facilities are located an amount equal to
the ad valorem taxes that would be otherwise due and payable. Such amounts
in lieu of taxes shall be payable by the Company directly to the political
subdivisions in which the Project Facilities are located. The Company may,
at its expense, in good faith contest any such taxes, assessments and other
charges and, in the event of any such contest, may permit the taxes,
assessments or other charges so contested to remain unpaid during the
period of such contest and any appeal therefrom, unless the Issuer or the
Trustee shall notify the Company that, in the opinion of counsel, by
nonpayment of any such items the lien of the Mortgage and Security
Agreement will be materially endangered or the Project Facilities or any
part thereof will be subject to loss or forfeiture, in which event such
taxes, assessments or charges shall be paid promptly. The Company agrees
that it will not use, as a basis for contesting or adjudicating any taxes
or assessments upon the Project Facilities, the fact that the Issuer has an
ownership interest therein. The Company also agrees to comply at its own
cost and expense with all notices received from public authorities from and
after the date hereof. If the Company shall fail to pay any of the
foregoing items required by this Section to be paid by it, the Issuer or
the Trustee may (but shall be under no obligation to) pay the same and any
amounts so advanced therefor by the Issuer or the Trustee shall become an
additional
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obligation of the Company to the one making the advance, which amounts,
together with interest thereon from the date thereof at a variable rate
equal to the rate of interest announced by the Trustee from time to time as
its prime interest rate, the Company agrees and covenants to pay. Such
interest shall be considered to be additional indebtedness secured hereby.
Section 6.8 Insurance.
(a) The Company shall at its own cost and expense obtain or
cause to be obtained insurance policies, naming the Company and the Issuer
as insureds (and the Trustee and the Bank as mortgagees as applicable),
insuring against such risks, and in such amounts, as are customarily
insured against by entities owning facilities of like size and type to the
Project Facilities, paying as the same become due and payable, all premiums
in respect thereof, including without limitation:
(1) from the commencement of acquisition of the Project
Facilities and thereafter, until the completion of construction,
builders' "all risk" insurance to the extent of the full insurable
value of the Project Facilities, provisions for which Company shall
require in all Contracts;
(2) from and after the completion of the acquisition of the
Project Facilities, fire insurance with standard extended
coverage endorsements, and vandalism and malicious mischief
insurance, at all times in an amount equal to 100% of the replacement
cost of the Project Facilities, exclusive of excavations and
foundations;
(3) comprehensive general liability insurance with minimum
limits of $500,000 per person and $500,000 per occurrence, and
property damage coverage with a minimum limit of $500,000, together
with umbrella liability coverage in the amount of $2,000,000 per
person and $2,000,000 per occurrence;
(4) Workers' compensation coverage and any other type of
insurance required by the laws of the State; and
(5) as applicable, business interruption insurance covering the
expenses of operating the Project Facilities for a period of
not less than four months following any damage to or destruction of
the Project Facilities, or rent abatement insurance against any
abatement of rent or other payments or failure to perform any other
duties or obligations required under any leases of the Project
Facilities resulting from fire or other casualty covered under the
above fire and extended coverage policy, in an amount not less than
four months rent payable
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to the Company as lessor under such leases, plus in the case of a net
lease, payment of real estate taxes and water and sewer rents borne by
the lessee thereunder.
(b) The Company shall require that any contractor employed for
installation and placement of the Project Facilities provide comprehensive
general liability coverage and workers compensation coverage in amounts
customarily carried by contractors with respect to such construction.
(c) The insurance policies or endorsements required by this
Section shall cover the entire Project Facilities and shall provide that
the coverage will not be reduced or cancelled without 30 days prior written
notice to the Issuer, the Trustee and the Bank. The Company shall provide
the Issuer, the Trustee and the Bank with certificates from the insurers at
such times as may be necessary (but in no event less than once each year)
to show that insurance is being maintained as required by this Section.
Section 6.9 Damage to or Condemnation of Project Facilities. In the
event of damage, destruction or condemnation of part or all of the
Project Facilities, the Company shall either: (i) restore the Project
Facilities or (ii) if permitted by the terms of the Bonds, direct the
Issuer to call the Bonds for extraordinary optional redemption. Damage to,
destruction of or condemnation of all or a portion of the Project
Facilities shall not terminate this Financing Agreement, or cause any
abatement of or reduction in the payments to be made by the Company or
otherwise affect the respective obligations of the Issuer or the Company,
except as set forth in this Financing Agreement. Subject to the provisions
of the Mortgage and Security Agreement and any security agreement held by
the Bank, in the event of damage, destruction or condemnation of the
Project Facilities or any part thereof, the net proceeds of any insurance
policies or the proceeds of any Condemnation Award shall, at the election
of the Company if no Event of Default hereunder or under the Indenture has
occurred and is continuing, be applied to the repair or restoration of the
portion of the Project Facilities which is the subject of such damage or
destruction, or which remains after such condemnation, or, if extraordinary
optional redemption of the Bonds is permitted by the terms of the Bonds,
deposited in the General Debt Service Account of the Bond Fund as a
prepayment of the Purchase Price and applied pursuant to the Indenture with
respect to such redemption of the Bonds.
Section 6.10 Limitation of Liens. The Company shall not create or
suffer to be created by any other person any lien or charge upon the
Acquisition Fund or the Project Facilities or any part thereof or upon the
rents, contributions, charges,
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receipts or revenues therefrom, other than liens thereon in favor of the
Issuer, the Trustee or the Bank and, with the prior approval of the Bank,
liens on the Project Facilities subordinate to the liens created by the
Mortgage and Security Agreement and this Financing Agreement and any
security agreement delivered to the Bank; provided that nothing in this
Financing Agreement shall limit the right of the Company to enforce
payments from the Acquisition Fund pursuant to Section 5.02 of the
Indenture. The Company further agrees to pay or cause to be discharged or
make adequate provision to satisfy and discharge, within 90 days after the
same shall become due, any such lien or charge and also all lawful claims
or demands for labor, materials, supplies or other charges which, if
unpaid, might be or become a lien upon the Acquisition Fund, the Project
Facilities or any part thereof of the revenues or income therefrom. Nothing
in this Section shall require the Company to pay or cause to be discharged
or make provision for any such lien or charge so long as the validity
thereof shall be contested in good faith and so long as the Acquisition
Fund and the Project Facilities are not subject to loss or forfeiture in
whole or part. The Issuer shall cooperate with the Company in any such
contest and shall cooperate with the Company with respect to obtaining any
necessary releases of liens or other encumbrances on the Project
Facilities.
Section 6.11 Company's Lease of Project Facilities. The Company may
lease any portion of the Project Facilities, but only subject to the
following conditions:
(a) The Company shall have obtained the written consent to such
lease of (i) the Issuer, (ii) if required by the Issuer or applicable laws,
regulations, rules or guidelines, the State Department of Commerce, and
(iii) if an Event of Default "has occurred and is continuing, the Trustee;
(b) No such lease shall relieve the Company of its obligation
to make the payments required under Sections 5.3 and 5.4 or to perform all
other covenants hereunder, for which the Company shall remain primarily
liable;
(c) The Company shall deliver to the Issuer and the Trustee a
copy of such lease within 30 days of the delivery thereof to the Company;
(d) If the tenant would be deemed a "principal user" or "test
period beneficiary" of the Project Facilities for purposes of Section
144(a) of the Code, the Company shall have obtained and submitted to the
Issuer and the Trustee an opinion of counsel qualified by experience to
render such an opinion that the proposed lease will not have an adverse
effect on the
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exclusion of interest on the Bonds from gross income for federal income tax
purposes;
(e) Not more than an aggregate of 25% of the Project Facilities
shall be leased to provide facilities the primary purpose of which is
provision of retail food and beverage service, automobile sales or service,
recreation or entertainment, nor shall such facilities furnish more than
25% of the rental revenues produced by the Project Facilities; and
(f) Such lease shall contain covenants (i) forbidding any use
of the leased premises which would constitute a violation of Section
144(a)(8) or Section 147(e) of the Code and (ii) if and as appropriate in
the opinion of counsel qualified by experience to render such an opinion,
with respect to the $10,000,000 limit of Section 144(a)(4)(A) of the
Code and the $40,000,000 limit of Section 144(a)(10) of the Code.
Section 6.12 Granting of Licenses, etc. If no Event of Default
under this Agreement has occurred and is continuing, the Company may, with
the prior consent of the Trustee and the Bank and notwithstanding anything
contained in this Financing Agreement to the contrary, at any time or
times, grant licenses and other rights or privileges in the nature thereof
with respect to any property included in the Project Facilities, free from
the lien of this Financing Agreement and the Mortgage and Security
Agreement, or release licenses and other rights or privileges, all with or
without consideration and upon such terms and conditions as the Company
shall determine. The Issuer agrees that it will execute and deliver or
will cause the execution and delivery of, and will cause and direct the
Trustee and the Bank to execute and deliver, any instrument necessary or
appropriate to confirm and grant or release any such license or other right
or privilege, upon receipt by the Issuer, the Trustee and the Bank of:
(a) A copy of the instrument of grant or release;
(b) A written application signed by the Company requesting
such instrument; and
(c) A certificate executed by the Company, and such other
persons as the Issuer may reasonably require, stating that such
grant or release is not detrimental to the proper conduct of the
business of the Company, and that such grant or release will not
impair the effective use or interfere with the efficient and
economical operation of the Project Facilities and will not in any
material respect weaken, diminish or impair the security intended to
be given by the Mortgage and Security Agreement or to be given by any
security agreement to the Bank.
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If the instrument of grant shall so provide, any such license or right of
such other parties thereunder shall be superior to the rights of the
Issuer, the Trustee and the Bank under this Financing Agreement, the
Mortgage and Security Agreement, or any security agreement to the Bank, and
shall not be affected by any termination of this Financing Agreement or
default on the part of the Company hereunder.
Section 6.13 Recording and Filing Requirements. This Financing
Agreement (or a memorandum hereof) shall be recorded in the office for the
recording of deeds in and for the County of Erie, Pennsylvania and in such
other place or places as may be required by law at the expense of the
Company. The Company shall at the request of the Trustee and at the
Company's own expense cause financing statements under Article IV of the
State Uniform Commercial Code to be filed in the places required by law in
order to perfect the security interests created by Section 5.2 naming the
Issuer as first secured party and the Trustee as assignee. The Company
shall furnish to the Trustee such opinions of counsel as the Trustee may
request setting forth what actions, if any, should be taken by the Company,
the Issuer or the Trustee to preserve such security interests in favor of
the Trustee, and the right, title and interest of the Trustee in and to
the trust estate under the Indenture. The Company shall execute and file or
cause to be executed and filed all further instruments as shall be required
by law to preserve such security interests, and shall furnish satisfactory
evidence to the Trustee of the filing and refiling of such instruments.
Section 6.14 Restricted and Prohibited Activities.
(a) The Company covenants that not more than 25% of the
proceeds of the Bonds shall be used (directly or indirectly) to provide
any facilities the primary purposes of which is to provide retail food or
beverage services, automobile sales or services, or the provision of
recreation or entertainment, within the meaning of Section 144(a)(8) of
the Code.
(b) The Company covenants that no portion of the proceeds of the
Bonds shall be used (directly or indirectly) to provide any facilities to
be used for a private or commercial golf course, country club, massage
parlor, tennis club, skating facility (including roller skating, skateboard
and ice skating), racquet sports facility (including any handball or
racquetball court), hot tub facility, suntan facility, racetrack,
airplane, skybox or other private luxury box, health club facility,
facility primarily used for gambling, or store, the principal business of
which is the sale of alcoholic beverages for consumption off premises,
within the meaning of Section 144(a)(8) or Section 147(e) of the Code.
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Section 6.15 Limitation on Capital Expenditures. Without having
first obtained an approving opinion of counsel qualified by experience to
render such an opinion, the Company will not make or permit to be made any
capital expenditures, within the meaning of Section 144(a)(4)(A) of the
Code, with respect to the Project Facilities or any other facilities in the
City of Erie, Erie County, Pennsylvania or with respect to any facilities
contiguous or integrated with any such facilities within the meaning of
Sections 1.103-10(b)(2)(ii)(e) and 1.103-10(d)(2) of the Treasury
Regulations (in this Section, "integrated facilities"), of which the
Company, any tenant, any other person who is a principal user of the
Project Facilities or any related person is the owner, occupant or other
principal user (in this Section, "capital expenditures"), which, when added
to (i) the face amount of the Bonds and (ii) the outstanding amount of any
other governmental obligations described in Section 144(a) of the Code
issued with respect to any facilities located in the City of Erie, Erie
County, Pennsylvania or with respect to any integrated facilities, of which
the Company, any tenant, any other person who is a principal user of the
Project Facilities or any related person is the owner, occupant or other
principal user, would make the total of such face amount, such outstanding
amount and all capital expenditures for the six-year period beginning three
years before the date of original issuance of the Bonds exceed $10,000,000,
or such other limit as may, in the opinion of such counsel, be permitted
under the Code.
Section 6.16 $40,000,000 Limit. The Company will not permit any
person to become a principal user of the Project Facilities or a related
person with respect to the Company any tenant or any such principal user,
and will not become a principal user or permit any tenant or any such
principal user or related person to become a principal user of any other
facilities, within the meaning of Section 144(a) of the Code, within the
three-year period following the date that the Project Facilities are first
placed in service if, as a result thereof, the $40,000,000 limit of
Section 144(a)(10) of the Code would be violated with respect to the
Bonds.
Section 6.17 Arbitrage Rebate. Within 30 days after the end of each
Bond Year, the Company shall determine the Excess Investment Earnings and
deliver moneys to the Trustee for deposit into the Rebate Fund (or instruct
the Trustee to transfer to the Rebate Fund moneys representing available
arbitrage earnings in the Acquisition Fund or the Bond Fund) in an
aggregate amount equal to the Excess Investment Earnings, if any. The
Company shall instruct the Trustee to withdraw from the Rebate Fund and pay
over to the United States (1) not less frequently than once each five years
after the date of original delivery and payment for the Bonds, an amount
equal to 90% of the net aggregate amount of Excess Investment Earnings
deposited
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into the Rebate Fund during such period, plus all investment earnings on
amounts on deposit in the Rebate Fund during such period (and not
theretofore paid to the United States), and (2) not later than 30 days
after the redemption, payment at maturity or other retirement of the last
Bond, 100% of all moneys in the Rebate Fund.
Section 6.18 Affiliates. The Company shall certify to the Trustee,
the Paying Agent and the Remarketing Agent the names of any and all persons
and companies controlled by or under common control with the Company and
agrees to update such certification upon the addition or deletion of any
such person or company.
Section 6.19 Notice and Certification With Respect to Bankruptcy
Proceedings. The Company shall promptly notify the Trustee of the
occurrence of any of the following events and shall keep the Trustee
informed of the status of any petition in bankruptcy filed (or bankruptcy,
insolvency or similar proceeding otherwise commenced) against the Company:
(i) application by the Company for or consent by the Company to the
appointment of a receiver, trustee, liquidator or custodian or the like of
itself or of its property, or (ii) admission by the Company in writing of
its inability to pay its debts generally as they become due, or (iii)
general assignment by the Company for the benefit of creditors, or (iv)
adjudication of the Company as a bankrupt or insolvent, or (v) commencement
by the Company of a voluntary case under the United States Bankruptcy Code
or filing by the Company of a voluntary petition or answer seeking
reorganization of the Company, an arrangement with creditors of the Company
or an order for relief or seeking to take advantage of any insolvency law
or filing by the Company of an answer admitting the material allegations of
an insolvency proceeding or action by the Company for the purpose of
effecting any of the foregoing, or (vi) without the application, approval
or consent of the Company, commencement of a proceeding in any court of
competent jurisdiction, under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking in respect of the Company an
order for relief or an adjudication in bankruptcy, reorganization,
dissolution, winding up, liquidation, a composition or arrangement with
creditors, a readjustment of debts, the appointment of a trustee, receiver,
liquidator or custodian or the like of the Company or of all or any
substantial part of its assets, or other relief in respect thereof under
any bankruptcy or insolvency law.
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ARTICLE VII
EVENTS OF DEFAULTS AND REMEDIES
Section 7.1 Events of Default; Acceleration. Each of the following
events is hereby defined as, and is declared to be and to constitute, an
"Event of Default" hereunder:
(a) Failure by the Company to make or cause to be made
any payment required to be made under Section 5.3 or 5.4 on or before the
date the same is due; or
(b) Failure or refusal by the Company to comply with
any of its other covenants hereunder and such failure or refusal shall
continue for a period of 60 days after written notice thereof has been
given to the Company and the Bank by the Issuer or the Trustee; provided
that if such failure is of such nature that it can be corrected but not
within 60 days, it will not be an Event of Default so long as prompt
corrective action is instituted and is diligently pursued; or
(c) The Company shall (i) apply for or consent to the
appointment of a receiver, trustee, liquidator or custodian or the like of
itself or of its property, or (ii) admit in writing its inability to pay
its debts generally as they become due, or (iii) make a general
assignment for the benefit of creditors, or (iv) be adjudicated a
bankrupt or insolvent, or (v) commence a voluntary case under the United
States Bankruptcy Code, or file a voluntary petition or answer seeking
reorganization, an arrangement with creditors or an order for relief, or
seeking to take advantage of any insolvency law or file an answer admitting
the material allegations of a petition filed against it in any bankruptcy,
reorganization, or insolvency proceeding, or action shall be taken by it
for the purpose of effecting any of the foregoing, or (vi) have instituted
against it, without the application, approval or consent of the Company, a
proceeding in any court of competent jurisdiction, under any law relating
to bankruptcy, insolvency, reorganization or relief of debtors, seeking in
respect of the Company an order for relief or an adjudication in
bankruptcy, reorganization, dissolution, winding up, liquidation, a
composition or arrangement with creditors, a readjustment of debts, the
appointment of a trustee, receiver, liquidator or custodian or the like of
the Company or of all or any substantial part of its assets, or other like
relief in respect thereof under any bankruptcy or insolvency law, and, if
such proceeding is being contested by the Company in good faith, the same
shall (A) result in the entry of an order for relief or any such
adjudication or appointment or (B) remain unvacated, undismissed and
undischarged for a period of 60 days; or
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(d) For any reason the Bonds are declared due and payable
by acceleration in accordance with Section 11.02 of the Indenture; or
(e) If the Trustee and the Paying Agent receive notice from
the Bank (i) that an Event of Default as defined in the Reimbursement
Agreement has occurred and is continuing and (ii) requesting the Trustee to
declare the principal of the outstanding Bonds immediately due and payable;
or
(f) If the Trustee and the Paying Agent receive notice from the
Bank prior to the 15th day following a drawing under the Letter of Credit
for interest on Bonds which remain outstanding after the application of the
proceeds of such drawing, that the Letter of Credit will not be reinstated
with respect to such interest:
then and in each and every such case the Trustee (as assignee of the
Issuer), by notice in writing to the Company, may, if such Event of Default
has not been cured, declare all sums which the Company is obligated to pay
under this Agreement to be due and payable immediately, and upon any such
declaration the same shall become and shall be immediately due and
payable, anything in this Agreement contained to the contrary
notwithstanding. In case the Trustee shall have proceeded to enforce any
right under this Agreement and such proceedings shall have been
discontinued or abandoned for any reason or shall have been determined
adversely to the Trustee, then and in every such case the Company, the
Issuer and the Trustee shall be restored respectively to their several
positions and rights hereunder, and all rights, remedies and powers of the
Company, the Issuer and its assignee or the Trustee shall continue as
though no proceeding had been taken.
Section 7.2 Payment of Purchase Price on Default; Suit Therefor.
(a) The Company covenants that, in case it shall fail to pay
or cause to be paid any sum payable by or on behalf of the Company under
Section 5.3 or 5.4 as and when the same shall become due and payable
whether at maturity or by acceleration or otherwise, then, upon demand of
the Trustee, the Company will pay to the Trustee the whole amount of the
Purchase Price that then shall have become due and payable under such
Sections, and, in addition thereto, such further amounts as shall be
sufficient to cover the costs and expenses of collection, including
reasonable compensation to the Trustee and the Paying Agent, their agents
and counsel, and any and all expenses and liabilities incurred by the
Issuer, the Trustee or the Paying Agent. In case the Company shall fail
forthwith to pay such amounts upon such demand, the Trustee shall be
entitled and
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empowered to institute any actions or proceedings at law or in equity for
the collection of the sums so due and unpaid, and may prosecute any such
action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company and collect in the manner
provided by law out of the property of the Company the moneys adjudged or
decreed to be payable.
(b) In case there shall be pending proceedings for the
bankruptcy or for the reorganization of the Company under the federal
bankruptcy laws or any other applicable law, or in case a receiver or
trustee shall have been appointed for the benefit of the creditors or the
property of the Company, the Trustee shall be entitled and empowered, by
intervention in such proceedings or otherwise, to file and prove a claim or
claims for the whole amount of the Purchase Price, including accrued
interest, and, in case of any judicial proceedings, to file such proofs of
claim and other papers or documents as may be necessary or advisable in
order to have the claims of the Trustee allowed in such judicial
proceedings relative to the Company, its creditors, or its property, and to
collect and receive any moneys or other property payable or deliverable
on any such claims, and to distribute the same after the deduction of its
charges and expenses. Any receiver, assignee or trustee in bankruptcy or
reorganization is hereby authorized to make such payments to Issuer or the
Trustee, and to pay to the Issuer, the Trustee or the Paying Agent any
amount due it for compensation and expenses, including counsel fees
incurred by it up to the date of such distribution.
Section 7.3 Other Remedies. Whenever all sums which the Company is
obligated to pay under this Agreement shall have been declared to be
immediately due and payable, the Issuer or the Trustee shall be entitled
to any one or more of the following remedies, but only to the extent they
are not prohibited by the Act, or other State law or State court decisions:
(a) The Company shall upon demand of the Issuer or the Trustee
surrender forthwith the possession of the Project Facilities, and it shall
be lawful for the Issuer or the Trustee, by such, officer or agent as it
may appoint, to take possession of all or any part of the Project
Facilities together with the books, papers and accounts of the Company
located at the Project Facilities and pertaining thereto, and to hold,
operate and manage the same, and from time to time make such repairs and
improvements as the Issuer or the Trustee shall deem wise.
(b) The Company hereby irrevocably authorizes and empowers any
attorney authorized to practice in the State who shall be designated by the
Issuer or its assignee (including the
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<PAGE> 33
Trustee), as attorney for the Company, as well as for all persons claiming
by, through or under the Company, to sign an agreement for entering against
the Company in any competent court an amicable action in ejectment for
possession of the Project Facilities (without any stay of execution or
appeal), against the Company and all persons claiming by, through or under
the Company and therein confess judgment for the recovery by the Issuer or
its assignee of possession of the Project Facilities, by which this
Agreement (or a copy hereof verified by an affidavit by an officer of the
Issuer or its assignee) shall be a sufficient warrant; whereupon if the
Issuer or its assignee so desires, a Writ of Possession may be issued
forthwith, without any prior writ or proceeding whatsoever, the Company
hereby releasing and agreeing to release the Issuer, its assignee, and
said attorney from all errors and defects whatsoever of a procedural nature
in entering such action or judgment or in causing such writ or writs
to be issued or in any proceeding thereon or concerning the same, provided
that the Issuer or its assignee shall have filed in such action an
affidavit made by some one on the Issuer's or its assignee's behalf setting
forth the facts necessary to authorize the entry expressly agreed that if
for any reason after such action has been commenced, the same shall be
discontinued, marked satisfied of record or be determined, and the
possession of the Project Facilities remain in or be restored to the
Company, the Issuer and its assignee shall have the right upon any other or
subsequent Event of Default, to bring one or more further amicable actions
in the manner hereinbefore set forth to recover possession of the Project
Facilities, and the authority and power above given to any such attorney
shall extend to all such further amicable actions.
(c) The Issuer or the Trustee may lease the Project Facilities
or any part thereof, in the name and for the account of the Company,
receive and sequester the rents, revenues, issues, earnings, income,
products and profits therefrom, collect rentals and enforce all other
remedies of the Company under any existing leases for any part of the
Project Facilities, and apply such receipts and any moneys received from
any receiver of any part of the Project Facilities in the manner provided
in the Indenture, and the Company shall remain liable for any deficiency in
its obligations under Sections 5.3 and 5.4 after the application of such
receipts and moneys. Whenever all payments under this Financing Agreement
which have become due shall be paid and all defaults made good, the Issuer
or the Trustee shall surrender possession of the Project Facilities to the
Company, the same right of entry, however, to exist upon any subsequent
Event of Default.
(d) The Issuer or the Trustee may terminate this Financing
Agreement and resell the Project Facilities at a
-29-
<PAGE> 34
private or public sale and the moneys collected under such resale will be
applied as provided in the Indenture, and the Company shall remain liable
for any deficiency in its obligations under Sections 5.3 and 5.4 after the
application of such proceeds.
(e) The Issuer or the Trustee shall be entitled to all the
remedies under Article IX is of the State Uniform Commercial Code as
secured party in respect of the property subject to the security interests
created under Section 5.2, including without limitation, the right to take
possession of such property and sell the same at private or public sale,
the proceeds of such sale to be applied as provided in the Indenture.
(f) The Issuer or the Trustee may take whatever action may
be available at law or in equity as may appear necessary or desirable to
collect the Purchase Price and any other amounts payable by the Company
hereunder, or to enforce performance and observance of any obligation,
agreement or covenant of the Company under this Financing Agreement.
(g) The Trustee may exercise any and all such rights and
remedies as it may have as Secured Party of the Mortgage and Security
Agreement.
If any statute or rule of law shall validly limit the amount of
damage to be paid under this Section to less than the amount provided in
this Section, the Issuer or the Trustee shall be entitled to the maximum
amount allowable under such statute or rule of law.
Section 7.4 Waiver. The Company expressly waives any right of
redemption with respect to the Project Facilities that it may have under
the laws of the State. The Company hereby waives and relinquishes the
benefits of any present or future law exempting the Project Facilities from
attachment, levy or sale on execution, or any part of the proceeds arising
from the sale thereof, and all benefit of stay of execution or other
process.
Section 7.5 Rights Cumulative. No remedy conferred upon or reserved
to the Issuer or the Trustee by this Agreement is intended to be exclusive
of any other available remedy, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Agreement or now or hereafter available at law or in equity. No waiver by
the Issuer or the Trustee of any breach by the Company of any of its
obligations, agreements or covenants hereunder shall be a waiver of any
subsequent breach, and no delay or omission to exercise any right or power
shall impair any such right or power or shall
-30-
<PAGE> 35
be construed to be a waiver thereof, but any such right and power may be
exercised from time to time and as often as may be deemed expedient.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Limitation of Liability of Issuer. In the event of any
default by the Issuer hereunder, the liability of the Issuer to the Company
shall be enforceable only out of its interest in the Project Facilities and
under this Financing Agreement and there shall be no other recourse for
damages by the Company against the Issuer, its members, officers, employees
and agents or any of the property now or hereafter owned by the Issuer.
Section 8.2 Notices. All notices and other communications provided
for hereunder shall be in writing and sent by United States certified or
registered mail, return receipt requested, or by telegraph, telex,
telecopier or private delivery service or personal service, addressed as
follows:
The Issuer: Erie County Industrial Development Authority
2103 East 33rd Street
Erie, Pennsylvania 16510
Attention: Secretary
The Company: McInnes Steel Company
441 East Main Street
Corry, Pennsylvania 16407
Attention: President
With Copy To: James E. Spoden, Esquire
100 State Street, Suite 700
Erie, Pennsylvania 16507
The Trustee: Marine Bank, Trustee
901 State Street
Erie, Pennsylvania 16501
Attention: Manager, Corporate Trust
-31-
<PAGE> 36
The Paying
Agent: Bankers Trust Company
4 Albany Street
New York, New York _____
Attention: ________________________
________________________
The Bank Marine Bank
901 State Street
Erie, Pennsylvania 16501
Attention: Corporate Banking Department
Letter of Credit Division
Section 8.3 Assignment of Company's Rights; Successors and Assigns.
The Company shall not assign this Financing Agreement or any interest of
the Company herein, either in whole or in part, without the prior written
consent of the Trustee, which consent shall be given if the following
conditions are fulfilled: (i) the assignee assumes in writing all of the
obligations of the Company hereunder; (ii) neither the validity nor the
enforceability of this Financing Agreement shall be adversely affected by
such assignment; (iii) the Project shall continue in the opinion of
counsel qualified by experience to render such opinion to be a "project" as
such term is defined in the Act after such assignment; (iv) such assignment
shall not, in the opinion of counsel qualified by experience to render such
opinion, have an adverse effect on the exclusion of interest on Bonds for
federal income tax purposes; (v) approval by the Issuer, which approval
shall not be unreasonably withheld; (vi) approval, if deemed necessary by
the Issuer, by the State Department of Commerce; and (vii) if a Letter of
Credit is held by the Paying Agent, consent of the Bank. For purposes of
this Section 8.3, no assignment shall be deemed to have occurred (a) upon
foreclosure by the Bank, or a conveyance in lieu thereof, or any other
transfer to the Bank or to a nominee of the Bank which is an affiliate of
Bank, or (b) by reason of a change in the identity of the stockholders or
partners of the Company. Subject to the foregoing, this Financing
Agreement shall be binding upon, and shall inure to the benefit of, the
parties hereto and their respective successors and assigns, and the terms
"Issuer" and "Company" shall, where the context requires, include the
respective successors and assigns of such persons. No assignment pursuant
to this Section shall release the Company from its obligations under this
Agreement, unless, if a Letter of Credit is held by the Paying Agent, the
Bank consents to such release.
-32-
<PAGE> 37
Section 8.4 Amendments. This Financing Agreement may not be amended
except as permitted by the Indenture. Any such amendment shall be by an
instrument in writing signed by the parties.
Section 8.5 Term of Agreement. This Financing Agreement and
the respective obligations of the parties hereto shall be in full force and
effect from the date hereof until (i) the principal or redemption price of,
premium, if any, on and all interest on the Bonds shall have been paid,
or provision for such payment shall have been made pursuant to the
terms of the Indenture, (ii) the lien of the Indenture shall have
been discharged pursuant to Section 17.01 thereof, (iii) the Company
shall have satisfied all its obligations under the Reimbursement Agreement,
and (iv) the Company and the Issuer shall have satisfied their
respective obligations under Section 5.8 hereof.
Section 8.6 Amounts Remaining in Funds. It is agreed by the parties
that any amounts remaining in the Bond Fund or Acquisition Fund after
payment in full of the Bonds (or provision for payment thereof having been
made in accordance with the provisions of the Indenture) and of the fees,
charges and expenses of the Trustee, the Paying Agent and the Issuer in
accordance with the Indenture, shall, upon release of the Indenture
pursuant to Section 17.01 thereof, be paid by the Trustee to the Bank to
the extent of any unreimbursed drawing under the Letter of Credit or any
other obligations owing by the Company to the Bank under the Reimbursement
Agreement. Any remaining moneys shall belong to and be paid by the Trustee
to the Company or such other person as may be entitled thereto as an
overpayment of the Purchase Price.
Section 8.7 No Warranty by Issuer of Condition, Suitability or
Zoning of Project Facility. The Issuer makes no warranty, either express
or implied, as to the condition of the Project Facilities or any part
thereof or that they will be suitable for the Company's purposes or needs.
The Company acknowledges and agrees that the Issuer is not a dealer in
property of such kind, and that the Issuer has not made, and does not
hereby make, any representation or warranty or covenant with respect to the
merchantability, fitness for a particular purpose, condition or suitability
of the Project Facilities in any respect or in connection with or for the
purposes and uses of the Company or its tenants. The Issuer makes no
representations as to the zoning of the land included in the Project
Facilities.
Section 8.8 Company's Federal Income Taxation. Consistent with the
terms and conditions of this Agreement, the Issuer agrees that the Company
shall be deemed the owner of the Project
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<PAGE> 38
Facilities for federal income tax purposes and further agrees to cooperate
fully with the Company in obtaining favorable federal income tax treatment
of this sale and the Project Facilities subject hereto. For such purposes,
the parties acknowledge their intent to create a valid installment purchase
agreement herein, with legal title to the Project Facilities held by Issuer
prior to transfer of such title to Company pursuant to Section 5.8 hereof.
Section 8.9 Survival of Covenants, Conditions and Representations.
All covenants, conditions and representations of the Company contained
herein which, by nature, impliedly or expressly involve performance in any
particular manner after the delivery of the Issuer's title or which cannot
be ascertained to have been performed until after the said delivery, shall
survive said delivery.
Section 8.10 Severability. If any provision hereof is found by a
court of competent jurisdiction to be prohibited or unenforceable, it shall
be ineffective only to the extent of such prohibition or unenforceability,
and such prohibition or unenforceability shall not invalidate the balance
of such provision to the extent it is not prohibited or unenforceable, nor
invalidate the other provisions hereof, all of which shall be liberally
construed in favor of the Issuer and the Trustee in order to effect the
provisions of this Agreement.
Section 8.11 Applicable Law. This Financing Agreement shall be
deemed to be a contract made in the State and governed by the laws of the
State.
Section 8.12 Headings. The captions or headings in this Agreement
are for convenience of reference only and shall not control or affect the
meaning or construction of any provision hereof.
Section 8.13 Counterparts. This Financing Agreement may be executed
in any number of counterparts, each of which when duly executed and
delivered shall be an original; but such counterparts together constitute
but one and the same instrument.
Section 8.14 Receipt of Indenture. The Company hereby acknowledges
that it has received an executed copy of the Indenture and is familiar with
its provisions, and agrees that its rights hereunder are subject to the
provisions of the Indenture, that it will comply with and be bound by all
of the provisions of the Indenture that are binding on the Issuer, that it
will take all such actions as are required or contemplated of the Company
under the Indenture to preserve and protect the rights of the Trustee and
of the Bondholders thereunder, and
-34-
<PAGE> 39
that the Company will not take any action which would cause a default
thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first written above.
ERIE COUNTY INDUSTRIAL DEVELOPMENT
[SEAL] AUTHORITY
Attest Robert H. Ploehn By Edward F. Bordonaro
-------------------- --------------------------------
Secretary Chairman
[SEAL] McINNES STEEL COMPANY
Attest James E. Spoden By Timothy M. Hunter
--------------------- --------------------------------
Asst. Secretary Treasurer
-35-
<PAGE> 40
COMMONWEALTH OF PENNSYLVANIA )
) ss:
COUNTY OF ERIE )
On this, the 7th day of November, 1991, before me, the undersigned
notary public, personally appeared Edward F. Bordonaro, who acknowledged
himself to be the Chairman of Erie County Industrial Development
Authority, a body corporate and politic, and that he as such officer,
being authorized to do so, executed the foregoing Financing Agreement for
the purposes therein contained by signing the name of said body corporate
and politic by himself as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Beverly J. McChesney
-------------------------------
Notary Public
My Commission Expires Notarial Seal
Beverly J. McChesney, Notary Public
(NOTARIAL SEAL) Erie, Erie County
My Commission Expires Sept. 5, 1994
COMMONWEALTH OF PENNSYLVANIA )
) ss:
COUNTY OF ERIE )
On this, the 7th day of November, 1991, before me the undersigned
notary public, personally appeared Timothy M. Hunter, who acknowledged
himself to be the President of McInnes Steel Company, a Pennsylvania
corporation, and that he as such officer, being authorized to do so,
executed the foregoing Financing Agreement for the purposes therein
contained by signing the name of said corporation by himself as such
officer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Beverly J. McChesney
-----------------------------
Notary Public
My Commission Expires Notarial Seal
Beverly J. McChesney, Notary Public
(NOTARIAL SEAL) Erie, Erie County
My Commission Expires Sept. 5, 1994
-36-
<PAGE> 41
EXHIBIT A
REAL ESTATE DESCRIPTION
OF PROJECT FACILITIES
ALL that certain piece or parcel of land situate in the City of Erie,
County of Erie and Commonwealth of Pennsylvania, bounded and described as
follows, to-wit:
BEGINNING at a concrete monument in the South right-of-way line of
East 12th Street, an 80 foot wide right-of-way, said point of beginning
being located South 25 degrees 46 feet 10 inches East, a distance of 40.00
feet from a city monument at the intersection of the center line of East
12th Street and the line common to reserve number 47 and 48; thence South
25 degrees 46 feet 10 inches East, a distance of 772.13 feet to a concrete
monument; thence South 63 degrees 35 feet West, along the North
right-of-way line of the Penn Central Railroad a distance of 300.02 feet to
a concrete monument thence North 25 degrees 46 feet 10 inches West, a
distance of 374.36 feet to a concrete monument, thence South 64 degrees 00
feet 35 inches West, a distance of 127.59 feet to a concrete monument in
the center line of a 30 foot wide common drive; thence along said center
line North 25 degrees 46 feet 10 inches West, a distance of 400.00 feet to
a point in the South right-of-way line of East 12th Street, an 80 foot
wide right-of-way, said point being located South 25 degrees 46 feet 10
inches East, a distance of 40 feet from a city monument located at the
intersection of the center line of East 12th Street and the center line of
Gilson Avenue; thence along the South right-of-way line North 64 degrees 00
feet 35 inches East passing over a concrete monument at a distance of
127.59 feet a total distance of 427.59 feet to a concrete monument and the
place of beginning.
Together with all improvements thereon, including a manufacturing
facility and office facility and commonly known as East 12 Street, Erie,
Pennsylvania.
A-1
<PAGE> 42
EXHIBIT B
PROJECT FACILITIES
The Project Facilities consist in part of a one-story 29,955 square
foot building and related furnishings, machinery and equipment now
identified for or hereafter to be incorporated into said building as
constructed on approximately 6.5 acres of land, located in the City of
Erie, Erie County, Pennsylvania. Such land on which such building will be
located is more fully described in the foregoing Exhibit A.
The following is an itemization of the Project Facilities furnishings,
machinery and equipment components as the same are identified as part of
the Project Facilities as of November 7, 1991:
Machinery, Fixtures and Equipment, including, but not limited to:
Ring Mill - The Ring Mill is a Wagner, Type RAW 63/63 - 16OO/315,
radial axial rolling machine, custom engineered to McInnes specification.
The machine is computer controlled, has an axial and radial rolling force
of 63 metric tons and is capable of rolling seamless rings with an outside
diameter ranging from 100 mm - 1600 mm (4" - 63"), ring height from 20 mm
- 315 mm (1" - 12") and a maximum ring weight of 630 KG (1,400 lbs.)
Hydraulic Press - The Hydraulic Press is an open die forging - ring
preform press and will be utilized in preforming blanks for the Ring Mill.
The Press is a four column, push down, of moving cylinder design with a
capacity of 1,200 U.S. tons to 1,800 U.S. tons. Ring blanks prepared on
this press will typically weight 10 KG (25 lbs.) and greater.
Mechanical Press - The Mechanical Press is a 1,600 U.S. ton to 2,500
U.S. ton forging press that will be utilized in preforming ring blanks for
the Ring Mill in the smaller than 10 KG (25 lbs.) size range. The
Mechanical Press is much faster than a Hydraulic Press, resulting in less
contact time, and less heat loss, which is important in the preparation of
small ring blanks. Preparation of large ring blanks on a Mechanical Press
is not possible due to its slower operating characteristics.
Forge Furnaces - To support the flexibility of the Wagner Ring Mill
four Forge Furnaces will be needed. Two of the four furnaces shall be
rated at 1,200 pound of through put per hour each. They shall use
electricity or natural gas as the means in which to heat product. They
shall have a modified slot design
<PAGE> 43
for access. The heating chamber size will be approximately 36 inches in
depth and 84 inches in width.
Two larger furnaces capable of 2,000 pounds minimum will be utilized
for the larger stock sizes. These furnaces will be of the box design,
having a door which moves vertically for access to the heating chamber.
The chamber size shall be approximately 84 inches in depth, 84 inches in
width, and 48 inches in height.
Heat Treat Furnaces - Two Heat Treat Furnaces are initially budgeted
to handle several heat treat cycles. The design parameters will be based
on a single car bottom style furnace, with a working chamber size of 72
inches width, 144 inches depth and 36 inches in height. Temperatures to
1,500 degrees Farenheit can be expected with heat uniformity of +/- 15
degrees Farenheit.
Electrical Service Upgrades - Due to the substantial electrical loads
which the Ring Mill and Hydraulic Press require, two Transformers are
required for the building. When purchased, the incoming electrical power
is 115 KVA. Although efficient for warehousing operations, the voltage and
capacity were grossly inadequate.
The transformers have been sized to provide current and future
anticipated demands. The 12,500 volt primary service will be stepped down
to two secondary services through the respective transformers, one being
4,160 volts, 2,000 KVA and the second a 480 volt, 1,500 KVA service.
TOGETHER with all additions thereto, substitutions therefor,
replacements thereof, and proceeds thereof, and together also with all
other fixtures, furnishings, machinery and equipment of whatever
description hereinafter incorporated into, becoming a part of or erected
upon the aforesaid 6.5 acres of land and the building constructed thereon
so as to constitute a complete and assembled economic unit and
manufacturing facility.
B-2
<PAGE> 44
EXHIBIT C
Required Amortization of Principal of $6,000,000
Purchase Price, per Section 5.3 of the Financing Agreement
Principal shall be paid in accordance with the following schedule. If
any specified payment date is not a Business Day, the payment date shall be
construed to mean the Business Day next preceding the specified payment date.
<TABLE>
<CAPTION>
Payment Beginning Principal Ending
Date Balance Payable Balance
------- --------- --------- -------
<S> <C> <C> <C>
October 31, 1994 $6,000,000 $700,000 $5,300,000
October 31, 1995 5,300,000 800,000 4,500,000
October 31, 1996 4,500,000 700,000 3,800,000
October 31, 1997 3,800,000 800,000 3,000,000
October 31, 1998 3,000,000 700,000 2,300,000
October 31, 1999 2,300,000 800,000 1,500,000
October 31, 2000 1,500,000 700,000 800,000
October 31, 2001 800,000 800,000 -0-
</TABLE>
C-1
<PAGE> 45
ASSIGNMENT
KNOW ALL MEN BY THESE PRESENTS that Erie County Industrial Development
Authority (the "Issuer"), does hereby assign, transfer and set over to
Marine Bank, as Trustee, a corporation and bank and trust company organized
and existing under the laws of the Commonwealth of Pennsylvania, having its
principal corporate trust office at 901 State Street, Erie, Pennsylvania,
(the "Trustee") under the Trust Indenture dated as of November 1, 1991 (the
"Indenture") of the Issuer, all right, title and interest of the Issuer in
and to the Installment Sale Agreement (the "Agreement") dated as of
December 1, 1988 between the Issuer and McInnes Steel Company, as well as
the Purchase Price (as defined therein) and other payments payable or which
may become payable thereunder, the same to be held in trust and applied by
the Trustee as provided in the Indenture, and the Issuer does hereby
constitute and appoint the Trustee, its true and lawful attorney for it and
in its name to collect and receive payment of any and all of said Purchase
Price and other payments and to give good and sufficient receipts therefor,
hereby ratifying and confirming all that said attorney may do in the
premises. The Trustee may, but, except as otherwise provided in the
Indenture, shall not be required to, institute any proceedings or take any
action in its name or in the name of the Issuer to enforce payment or
collection of any or all of such payments on account of said Purchase Price
and other payments.
Notwithstanding such assignment and transfer, so long as the Issuer
shall not be in default under the Indenture,
(a) the Issuer shall have the right and duty to give all
approvals and consents permitted or required under the Agreement subject to
any restrictions of the Indenture;
(b) the Issuer shall have the right to execute supplements
and/or amendments to the Agreement to the extent and in the manner
permitted by the Indenture and by the Agreement;
(c) there shall be no responsibility on the part of the
Trustee for the duties or obligations of the Issuer contained in the
Agreement and in any supplements and/or amendments thereto; and
(d) the Issuer shall be entitled to indemnification and
payment for its expenses, all in accordance with the Agreement.
1 of 2
<PAGE> 46
IN WITNESS WHEREOF, the Issuer has caused this Assignment to be duly
executed in its name by its Chairman or Vice Chairman, and its corporate
seal to be hereunto affixed and attested by its Secretary or Assistant
Secretary, and this Assignment to be dated as of December 1, 1988.
ERIE COUNTY INDUSTRIAL DEVELOPMENT
AUTHORITY
By Edward F. Bordonaro
-------------------------------
Chairman
[SEAL]
Attest:
Robert H. Ploehn
-----------------------
Secretary
COMMONWEALTH OF PENNSYLVANIA )
) ss:
COUNTY OF ERIE )
On this, the 7th day of November, 1991, before me, a Notary Public,
personally appeared Edward F. Bordonaro, known to me to be the Chairman of
the aforesaid Authority, and being authorized to do so, he did acknowledge
the foregoing Assignment as the act and deed of said Authority.
WITNESS my hand and official seal.
Beverly J. McChesney
---------------------------
Notary Public
Notarial Seal
Beverly J. McChesney, Notary Public
Erie, Erie County
My Commission Expires, Sept. 5, 1994
2 of 2
<PAGE> 1
EXHIBIT 9.1
EQUITY HOLDERS AGREEMENT
This Equity Holders Agreement ("Agreement") is dated as of February 29,
1996 and is effective as of March 8, 1996 by and among FIRST NEW ENGLAND
CAPITAL LIMITED PARTNERSHIP, having its principal place of business at 100
Pearl Street, Hartford, Connecticut 06103 ("First New England"), MORAMERICA
CAPITAL CORP., having its principal place of business c/o InvestAmerica
Investment Advisors, Inc., 101 Second Street S.E., Suite 800, Cedar Rapids,
Iowa 52401 ("MorAmerica"), and NORTH DAKOTA SMALL BUSINESS INVESTMENT COMPANY A
NORTH DAKOTA LIMITED PARTNERSHIP, having its principal place of business c/o
InvestAmerica N.D. Management, Inc., 101 Second Street S.E., Suite 800, Cedar
Rapids, Iowa 52401 ("NDSBIC") (First New England, MorAmerica and NDSBIC are
hereinafter sometimes collectively referred to as the "Investors" and
individually as an "Investor"), CENTRUM INDUSTRIES, INC., a Delaware
corporation having its principal place of business at 6135 Trust Drive, Suite
104A, Holland, Ohio 43528 (the "Company"), and the individuals and entities
whose signatures appear at the end of this Agreement (the "Existing
Shareholders") (the Investors and the Existing Shareholders are hereinafter
sometimes collectively referred to as the "Equity Holders").
RECITALS
The following facts set forth the background to this Agreement:
A. Simultaneously with the execution of this Agreement, the Company is
entering into a Note and Warrant Purchase Agreement with the Investors (the
"Purchase Agreement") providing for the issuance by the Company to each
Investor of an 11% Convertible Subordinated Note due March 31, 2001 (each a
"Note", and collectively, the "Notes"), aggregating $2,500,000 in principal
amount and one or more warrants (each a "Warrant", and collectively, the
"Warrants") to purchase a certain number of the shares of common stock of the
Company.
B. As part of the transaction, the Company and the Investors are also
entering into a Put Agreement (the "Put Agreement") relating to the transfer of
the Warrants and the Securities (as such term is defined in the Put Agreement)
between the Company and the Investors.
C. The Company, the Investors and the Existing Shareholders desire to set
forth certain understandings regarding the management of the Company and the
transfers of Securities or other securities of the Company.
NOW THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the Company and the Investors agree as follows:
1. Management of the Company
1.1 (a) Each of the Equity Holders agrees that from and after the date
hereof such Equity Holder will vote (or cause to be voted) all of the voting
stock of the
<PAGE> 2
Company owned or held of record by such Equity Holder in favor of the election
and continuation in office of a Board of Directors consisting of not less than
eight and not more than nine members, one (1) of which shall be designated by
First New England (or its successors or assigns) and one (1) of which shall be
designated jointly by MorAmerica and NDSBIC (or their respective successors and
assigns). Each such designee shall, in the reasonable judgment of the Investor
designating such designee, be qualified to serve on such Board of Directors.
(b) The Company and the Equity Holders each agrees that it will use its
best efforts to cause the election of any Board member designated by the
Investors pursuant to Section 1.1(a) hereof (an "Investor Candidate") at each
annual or special meeting of the Company's shareholders at which directors are
to be elected, including but not limited to the following: (i) the Company
shall cause the name of each Investor Candidate to be included in the slate of
directors submitted to the Company's shareholders for approval at such annual
or special meeting; and (ii) the Company shall, in its proxy solicitation
materials and other communications to its shareholders in connection with such
meeting, recommend that shareholders vote "for" each of the Investor
Candidates.
(c) The Company shall use its best efforts to cause its Board of
Directors to designate a Compensation Committee and an Audit Committee,
to the extent and only to the extent that such committees have not heretofore
been designated by the Board of Directors. and to appoint one (1) of the
Investor Candidates on each of the Compensation Committee and Audit Committee
of the Board of Directors.
1.2 The Company shall use its best efforts in accordance with Section 1.1
hereof to cause the election as a director of the Company of each director then
serving and previously designated pursuant to Section 1.1 if such director is
still eligible to serve as a director unless the Investor that designated such
person designates another person as its director designee. No Equity Holder
shall vote to remove any member of the Board of Directors designated in
accordance with Section 1.1 or this Section 1.2 unless the Investor that
designated such person so votes and then the other Equity Holders shall
likewise so vote.
1.3 Each Equity Holder hereby grants to and is deemed to have executed in
favor of First New England, MorAmerica or NDSBIC, as the case may be, a proxy
to vote all of the voting stock of the Company owned by the grantor of the
proxy for the election to the Board of Directors of the Company of the Investor
Candidates designated by First New England or MorAmerica and NDSBIC, as the
case may be, in accordance with Sections 1.1 and 1.2. This proxy is coupled
with an interest and is irrevocable by the Equity Holders during the term of
this Agreement.
1.4 The Board of Directors shall meet at least quarterly during the term
of the Notes, provided, however, that upon the occurrence and continuation of
an Event of Default under the Purchase Agreement, the Requisite Interest of
Investors may elect to require that the Board of Directors meet at least once
every month. The Investors shall be entitled to at least fourteen (14) days'
advance written notice of each regularly scheduled meeting of the Board of
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<PAGE> 3
Directors or the shareholders of the Company. Emergency meetings of the Board
of Directors may be scheduled with reasonable advance notice of such meetings.
1.5 (a) The reasonable out-of-pocket costs and expenses incurred by
any Investor Candidate in performing his or her duties as a member of the Board
of Directors of the Company, including but not limited to reasonable travel and
lodging costs incurred in connection with attending meetings of the Board of
Directors and stockholders of the Company, shall be reimbursed by the Company
promptly upon submission of written invoices therefor documenting such costs
and expenses in reasonable detail. In addition, (i) if at any time one of the
positions on the Board of Directors reserved for the Investors pursuant to
Section 1.1 hereof are not occupied, the Company shall reimburse any and all
reasonable out-of-pocket costs and expenses, including but not limited to
reasonable travel and lodging costs, incurred by not more than one (1)
alternate director or other representative of the Investors in attending any
meeting of the Board of Directors and the stockholders of the Company, and (ii)
if at any time both of the positions on the Board of Directors reserved for the
Investors pursuant to Sections 1.1 and 1.2 hereof are not occupied, the Company
shall reimburse any and all reasonable out-of-pocket costs and expenses,
including but not limited to reasonable travel and lodging costs, incurred by
not more than two (2) alternate directors or other representatives of the
Investors in attending any meeting of the Board of Directors and the
stockholders of the Company.
(b) Each Investor who is not represented on the Board of Directors
by an Investor Candidate designated pursuant to Section 1.1 or Section
1.2 as a member of such Board shall have the right to designate an observer to
attend meetings of the Company's directors and stockholders. Each such observer
shall receive notice of all meetings and access to all information provided the
members of the Board of Directors or stockholders, as the case may be, and,
subject to Section 1.5(a), shall be permitted to attend such meetings at the
expense of the Company, provided that the Company shall not be required to bear
such expenses for more than two (2) observers in connection with each such
meeting.
1.6 The Company and the Equity Holders agree that members of the Board
of Directors shall not be compensated for their services, but each such member
and each designee under Section 1.5 hereof shall be reimbursed for all of
his/her reasonable expenses incurred in connection with his/her attendance at
meetings of the Board of Directors.
1.7 For purposes of this Agreement, a "Requisite Interest" at any time
means the Investors owning one hundred percent (100%) of the Total Shares (as
defined in the Put Agreement) at such time.
2. Director Indemnification. In the event that any director contemplated
by this Agreement shall be made or threatened to be made a party to any action,
suit or proceeding with respect to which he may be entitled to indemnification
by the Company pursuant to its Certificate of Incorporation or otherwise, he
shall be entitled to be represented in such action, suit or proceeding by
counsel of his choice and the reasonable expenses of such representation shall
be
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<PAGE> 4
reimbursed by the Company to the extend provided in or authorized by said
Certificate of Incorporation or other provision and permitted by applicable
law.
3. Option to Participate in Change of Control.
3.1 If at any time after February 28, 1999, either (a) the Company
receives a bona fide offer to engage in a "Change in Control Event" (as defined
in the Put Agreement), or (b) any of the Equity Holders receives a bona fide
offer to engage in a "Change in Control Event" (as deemed in the Put
Agreement), then:
(i) the Company or such Equity Holder, as the case may be, shall deliver
prompt written notice of the same to the Investors and all other parties to
this Agreement, which notice shall set forth in reasonable detail the identity
of the offeror and the terms and conditions of such offer;
(ii) if within forty-five (45) days after receiving such notice, a
Requisite Interest of the Investors notifies the Company and the Equity Holders
in writing that the Investors desire to give effect to this Section 3.1, then
the Company shall, at its option, subject to the requirements of applicable
law, either (x) take all necessary and appropriate corporate action to accept
the bona fide offer or otherwise consummate the Change in Control Event, or (y)
purchase, within fourteen (14) days after receiving such written notice, all of
the Warrants and Securities then outstanding for a purchase price per share and
upon the same terms and conditions as such bona fide offer; and
(iii) in the event that a Change of Control Event to be consummated
pursuant to clause (x) of Section 3.1(ii) shall result in a sale, transfer or
exchange of less than all of the voting stock of the Company (whether through
sale, merger, consolidation or otherwise), each Investor shall participate in
the sale, transfer or exchange pursuant to the Change of Control Event on a pro
rata basis, based upon a fraction, (a) the numerator of which is the sum of (I)
the number of shares of Warrant Issuable Stock (as defined in the Put
Agreement) for all Warrants held by it, plus (II) the number of shares of all
Securities held by it, and (b) the denominator of which is the total number of
shares of voting stock to be sold pursuant to such Change of Control Event.
The failure of a Requisite Interest of the Investors to notify the Company in
writing of the Investors' desire to give effect to this Section 3.1 within such
forty-five (45) day period shall be deemed a waiver by the Investors of this
Section 3.1 solely with respect to such Change of Control Event.
4. Participation in Senior Management Compensation. (a) In any Change in
Control Event, whether or not Section 3.1 hereof is applicable and, if
applicable whether or not the Investors have elected to give effect to the
provisions of such Section 3.1, each Investor shall be entitled to receive from
the Company, in addition to any other consideration which the Investors may
receive in such Change in Control Event, an amount equal to the product of (i)
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<PAGE> 5
the aggregate amount, discounted to present value using a discount rate equal
to the rate of interest on the Notes, of "Excess Compensation" (as defined
below) to be received by the Company's "Senior Management" (as defined below)
on and after the date such Change in Control Event is consummated (the "Closing
Date"), multiplied by (ii) a fraction, (A) the numerator of which is the sum of
(I) the number of shares of Warrant Issuable Stock for all Warrants held by
such Investor, plus (II) the number of shares of Securities held by such
Investor, in each case immediately prior to the Closing Date, and (B) the
denominator of which is the sum of (I) the number of shares of the Company's
common stock issued and outstanding (including, without limitation, all
Securities), plus (II) the number of shares of Warrant Issuable Stock, in each
case immediately prior to the Closing Date. Such amount shall be payable to
the Investors on the Closing Date.
(b) For purposes of this Agreement:
(i) "Excess Compensation" means the aggregate compensation and
remuneration (including but not limited to deferred compensation payable in any
calendar year after the calendar year in which the Closing Date occurs), other
than "Excluded Compensation" (as defined below), to be received by Senior
Management on and at any time after the Closing Date, discounted to present
value at a discount rate equal to the rate of interest on the Notes;
(ii) "Excluded Compensation" means an amount equal to the annual base
salaries and bonuses actually received by Remaining Senior Management during
the twelve (12) months immediately preceding the Closing Date;
(iii) "Remaining Senior Management" shall mean members of Senior
Management who, pursuant to written, non-contingent employment agreements
between each such member and the Company or its successor-in-interest will
remain employed by the Company or such successor-in-interest on a full-time
basis for a period of at least twelve months following the Closing Date; and
(iv) "Senior Management" means any of the Company's officers, any of the
Company's directors, and any of the Company's employees owning two (2%) percent
or more of the issued and outstanding common stock of the Company, in each case
during the twelve (12) months immediately prior to the Closing Date.
5. Legally Available Funds.
(a) If the Company is obligated to make any payment to any Investor
pursuant to Sections 3 or 4 hereof (each a "Participation Payment" and
collectively the "Participation Payments"), the failure of the Company to have
sufficient funds legally available to make any such Participation Payment shall
not excuse the Company's failure to make such Participation Payment in
accordance with the terms of this Agreement, and the Company shall be and
remain liable for the full amount of all sums payable in accordance with the
terms hereof until paid in full. However, the provisions of this Section 5
shall not be construed so as to require the
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Company to make any Participation Payment other than out of funds legally
available therefor under Delaware law; accordingly, if the Company does not at
the time such Participation Payment is payable have sufficient funds legally
available for such Participation Payment, then the Company shall use those
funds that are legally available to partially make such Participation Payment.
In the event that a Participation Payment is payable to more than one Investor,
all partial payments of Participation Payments shall be made pro rata among the
Investors, based upon the allocation formula given in subsection (b) of this
Section 5. At any time thereafter when additional funds of the Company become
available, the Company will immediately use such funds to pay all unpaid
portions of Participation Payments. Such payment of unpaid Participation
Payments shall be made pro rata among the Investors in accordance with the
formula given in subsection (b) hereof below to the extent that legally
available funds are not then available to fully satisfy all unpaid
Participation Payments.
(b) In the event of any required pro rata payment of Participation
Payments among the Investors in accordance with the provisions of subsection
(a) of this Section 5, the amount of such pro rata payment to be made to each
Investor entitled thereto shall be the product of (i) the amount of legally
available funds, multiplied by (ii) a fraction, (A) the numerator of which is
the amount of the unpaid Participation Payment owing to such Investor, and (B)
the denominator of which is the total unpaid Participation Payments owing to
all Investors.
(c) If the Company is obligated to make Participation Payments, and if
the Company does not have sufficient funds legally available therefore,
then the Company shall take any and all action necessary to increase its
legally available funds to an amount sufficient therefore, subject, however, to
the terms and conditions of the Finance Documents.
6. Notices. Whenever any party hereto desires or is required to give any
notices, demand, or request with respect to this Agreement, each such
communication shall be in writing and shall be effective only if it is
delivered by personal service or delivered by a nationally recognized overnight
courier, in each case addressed to the parties hereto at their respective
addresses set forth in the Purchase Agreement or set forth beneath such party's
signature at the end of this Agreement. Any party may change its address for
such communications by giving notice thereof to the other party in conformity
with this Section.
7. Assignment; Binding Effect; Definitions. Each Investor's rights
hereunder may be assigned to any person or entity to whom the Notes, Warrants
or Securities are legally transferred. This Agreement shall be binding on the
parties hereto and their respective legal representatives, successors and
assigns and on the transferees of any Securities now owned or hereafter
acquired by them, and shall inure to the benefit of the parties hereto and
their respective legal representatives, successors and permitted assigns.
Terms herein defined in the singular number shall include the plural, and terms
defined in the plural number shall include the singular number, as the context
may require. The neuter gender shall also denote the masculine and the feminine
where the context so permits. The headings in this Agreement are for purposes
of reference only and shall not be considered in construing this Agreement.
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8. Entire Agreement; Amendment and Waiver. This Agreement contains the
entire agreement and understanding of the parties with respect to the subject
matter hereof and supersedes all prior negotiations, commitments, agreements
and understandings heretofore had between them with respect thereto. This
Agreement may be amended, and compliance with any provisions of this Agreement
may be omitted or waived, by the written agreement of all parties. A waiver on
one occasion shall not constitute a waiver on any further occasion.
9. Counterparts; Signatories. This Agreement may be executed in more than
one counterpart, each of which shall be deemed to be an original and all of
which, together, shall constitute one and the same instrument. Each of the
parties hereto agrees that its respective obligations hereunder are not
contingent upon the execution of this Agreement by all intended parties hereto.
In the event that not all of the intended parties hereto execute this
Agreement, this Agreement shall nonetheless be legal and binding upon, and
enforceable in accordance with its terms against, each party hereto who has
executed a counterpart to this Agreement.
10. Applicable Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the internal laws of Delaware, including but
not limited to the General Corporation Law of the State of Delaware, without
regard to its conflict of law rules.
11. Legend. Each certificate for Securities shall bear a legend stating
in substance as follows:
The shares of stock represented by this certificate are subject to
the terms and provisions of an Equity Holders' Agreement dated as
of February 29, 1996 among the Company and certain holders of
capital stock of the Company, as amended. The Company will furnish
a copy of the Equity Holders' Agreement to the holder hereof upon
written request and without charge.
12. Specific Enforcement. The Company acknowledges and agrees that the
recovery of money damages will not constitute an adequate remedy for breach of
the provisions of this Agreement. Accordingly, the Company agrees that the
provisions of this Agreement may be specifically enforced against the Company
(in addition to any other remedies available for breach of this Agreement); and
the Company hereby waives the defense in any equitable proceeding that there is
an adequate remedy at law for any such breach.
13. Termination. The provisions of this Agreement shall terminate upon
(i) payment in full of all obligations due under the Notes and (ii) either (A)
the expiration of the Warrants (whether as a result of the full exercise
thereof or by the teens thereof) or (B) the date upon which the shares issuable
upon the full exercise of the Warrants is less than ten percent (10%) of the
total shares issuable upon the full exercise of the Warrants on the date of
this Agreement.
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<PAGE> 8
IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first above written.
CENTRUM INDUSTRIES, INC.
By: /s/ George H. Wells
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George Wells
Its President
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<PAGE> 9
FIRST NEW ENGLAND CAPITAL
LIMITED PARTNERSHIP
By: FINEC Corp., its General Partner
By:
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Richard Klaffky
Its President (Duly Authorized)
MORAMERICA CAPITAL CORPORATION
By: InvestAmerica Investment Advisors, Inc.
its Investment Adviser
By: /s/ David Schroder
-----------------------------
David Schroder, its President
(Duly Authorized)
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<PAGE> 10
NORTH DAKOTA SMALL BUSINESS
INVESTMENT COMPANY, A NORTH
DAKOTA LIMITED PARTNERSHIP
By: InvestAmerica ND Management, Inc.,
its Investment Adviser
By: /s/ David Schroder
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David Schroder, its President
(Duly Authorized)
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Name (Print):
Address:
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FIRST NEW ENGLAND CAPITAL
LIMITED PARTNERSHIP
By: FINEC Corp., its General Partner
By: /s/ Richard Klaffky
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Richard Klaffky
Its President (Duly Authorized)
MORAMERICA CAPITAL CORPORATION
By: InvestAmerica Investment Advisors,
Inc., its Investment Adviser
By:
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David Schroder, its President
(Duly Authorized)
NORTH DAKOTA SMALL BUSINESS
INVESTMENT COMPANY, A NORTH
DAKOTA LIMITED PARTNERSHIP
By: InvestAmerica ND Management, Inc., its
Investment Adviser
By: /s/ David Schroder
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David Schroder, its President
(Duly Authorized)
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Name (Print):
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/s/ George H. Wells
George H. Wells
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Name (Print):
Address: 10707 Obee Road
Whitehouse, OH 43571
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/s/ John R. Ayling
John R. Ayling
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Name (Print):
Address:
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1400 Rivercrest
Perrysburg, OH 43551
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/s/ David L. Hart
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Name (Print): David L. Hart
Address:
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2520 Middlesex Dr.
Toledo, OH 43606
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/s/Thomas E. Seiple
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Name (Print): Thomas E. Seiple
Address:
26570 Carrington Blvd.
Perrysburg, Ohio 43551
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/s/ William C. Davis
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Name (Print): William C. Davis
Address:
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Address:
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<PAGE> 1
EXHIBIT 10.3
CENTRUM INDUSTRIES, INC.
$2,500,000
Debt and Equity Financing
______________________________________________
Note And Warrant Purchase Agreement
______________________________________________
Dated as of February 29, 1996
and Effective as of March 8, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
I. THE NOTES AND THE WARRANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Issuance and Sale of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Prepayment of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 The Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
II. CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Performance; No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 Compliance Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4 Certificate of Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 Tax Clearance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.8 Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.11 Sale of Other Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 Processing Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.13 Payment of Counsel Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.14 Changes in Corporate Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.15 Absence of Adverse Change or Litigation . . . . . . . . . . . . . . . . . . . . . . . 4
2.16 Infusion of Equity; Bridge Notes . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 Subordination of Certain Existing Debt . . . . . . . . . . . . . . . . . . . . . . . 5
2.18 Proceedings and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
III. REPRESENTATIONS AND WARRANTIES OF CENTRUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1 Organization, Standing, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.3 Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.4 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.6 Material Adverse Changes, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.7 Tax Returns and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.8 Existing Indebtedness, Liens, Investments and Transactions with Affiliates . . . . . 7
3.9 Title and Condition of Properties; Liens . . . . . . . . . . . . . . . . . . . . . . 7
3.10 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.11 Patents' Copyrights, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.12 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.13 Litigation; Observance of Agreements, Statutes and Orders, etc. . . . . . . . . . . . 9
3.14 Authorization and Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.15 Compliance with Other Instruments, etc. . . . . . . . . . . . . . . . . . . . . . . . 9
3.16 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
3.17 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.18 Deferred Compensation Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.19 Governmental Consent, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.20 Offer of Notes and Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.21 Investment Company Act Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.22 Regulation U, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.23 Foreign Credit Restraints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.24 Brokers, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.25 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
IV. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.1 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.2 Financial Statements and Information . . . . . . . . . . . . . . . . . . . . . . . . 14
4.3 Material Events and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.4 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.5 Books of Record and Account; Reserves . . . . . . . . . . . . . . . . . . . . . . . . 17
4.6 Payment of Taxes; Corporate Existence; Maintenance of
Properties; Compliance with Laws; Lines of Business;
Proprietary Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.7 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.8 Payment of Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.9 Attendance at Directors' Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.10 "C" Corporation Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.12 Management Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.13 Management Succession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.14 Directors' and Officers' Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.15 Environmental Compliance and Identification . . . . . . . . . . . . . . . . . . . . . 20
4.16 NASDAQ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.17 Micafil and American Handling Disclosure . . . . . . . . . . . . . . . . . . . . . . 21
4.18 McInnes Steel, et al. Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.19 Anti-Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
V. FINANCIAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.1 Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.2 Ratio of Total Liabilities to Net Worth . . . . . . . . . . . . . . . . . . . . . . . 26
5.3 Fixed Charge Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
VI. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.1 Restriction on Dividends. Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.2 Limitation on Loans, Advances and Investments . . . . . . . . . . . . . . . . . . . . 27
6.3 Restrictions on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.4 Restriction on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.5 Restrictions on Fundamental Changes . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.6 Limitation on Transactions with Affiliates and Others . . . . . . . . . . . . . . . . 31
6.7 Limitation on Acquisitions and Mergers . . . . . . . . . . . . . . . . . . . . . . . 31
6.8 Lines of Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
6.9 Incentive Stock Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
VII. DEFAULT; REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.1 Events of Default Defined; Acceleration of Maturity . . . . . . . . . . . . . . . . . 32
7.2 Suits for Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.3 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.4 Remedies Not Waived . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.5 Notice of Action by Noteholders or Claimed Defaults . . . . . . . . . . . . . . . . . 34
VIII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.1 Registration, Transfer and Exchange of Notes and Warrants . . . . . . . . . . . . . . 34
8.2 Replacement of Lost, Stolen, Destroyed or Mutilated Notes or Warrants . . . . . . . . 35
8.3 Amendment and Waiver; Offer to Purchase Notes . . . . . . . . . . . . . . . . . . . . 36
8.4 Method of Payment of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.5 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.6 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.7 Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.8 Survival of Agreements, Representations and Warranties, etc.. . . . . . . . . . . . . 38
8.9 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.10 Purchase for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.12 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.13 Waiver of Trial by Jury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.14 Prejudgment Remedy Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.15 Limitation of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.16 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
</TABLE>
<PAGE> 5
NOTE AND WARRANT PURCHASE AGREEMENT
Dated as of February 29, 1996
Effective as of March 8, 1996
To each of the Investors named in
Exhibit A (the "Investors")
Ladies and Gentlemen:
Centrum Industries, Inc., a Delaware corporation ("Centrum") and each
of its direct Subsidiaries named in Exhibit A-1 (with Centrum, collectively the
"Companies" and individually a "Company"), hereby agrees with you as follows:
I. THE NOTES AND THE WARRANTS
1.1 Issuance and Sale of Notes.
(a) Centrum has authorized the issue and sale of its 11%
Subordinated Convertible Notes due March 31, 2001 (together with any note
issued in exchange therefor or replacement thereof, the "Notes"), in the
aggregate principal amount of $2,500,000. The Notes are to be in such form and
bear interest and be payable on such terms as are prescribed in Section 1.1(b)
hereof. Simultaneously with the execution hereof, Centrum is issuing and
selling to you Notes in the principal amount set forth opposite your name on
Exhibit A annexed hereto. The purchase price of the Notes is the face amount
thereof and, simultaneously herewith, each of you is paying the purchase price
for the Note that you are purchasing by wire transfer of funds to an account of
Centrum.
(b) The Notes will be in the form of Exhibit B annexed
hereto. The Notes will bear interest from the date hereof at the rate of 11%
per annum, payable monthly on the last day of each month, commencing on March
31, 1996 and at maturity. Upon the occurrence and during the continuation of a
Default or Event of Default hereunder, interest shall accrue on the outstanding
principal amount and all other indebtedness hereunder at the rate of 14% per
annum. Further, in the event that Centrum for any reason (including the
operation of the Subordination Agreement (as defined in Section 8.12 hereof))
fails to pay any regularly scheduled installment of interest within ten (10)
days after the date it is due and payable, without in any way affecting any
right of any holder of a Note to declare an Event of Default to have occurred,
a late charge equal to five percent (5%) of the unpaid amount shall be assessed
against Centrum for each month that said amount is late, and shall be
immediately due and payable without demand or notice of any kind. The minimum
late charge shall be $15.00.
(c) The Notes shall be convertible into common shares of
Centrum in accordance with the terms set forth in the Notes and in the Warrants
(hereinafter defined).
<PAGE> 6
1.2 Prepayment of Notes. The Notes may be prepaid in whole at any
time, or in part from time to time, together with all accrued but unpaid
interest as of the date of such prepayment, without premium or penalty,
provided that the minimum aggregate amount of principal that may be repaid on
any occasion is $100,000. Prepayments shall be applied first to interest
accrued to the date of prepayment and then to principal payments due in inverse
order of maturity. In the event of prepayment of less than the whole of all
Notes, the amount of the prepayment shall be allocated to, and shall be paid on
account of, each Note in the proportion which the original principal amount
thereof bears to the original principal amount of all Notes.
1.3 The Warrants.
(a) Simultaneously with the execution hereof, Centrum is
issuing and delivering to you warrants in the form of Exhibit C attached
hereto, exercisable at an exercise price of $2.00 per share, for an aggregate
of 1,250,000 shares (subject to adjustment as more particularly described in
such warrants) of the Common Stock (as defined in such warrants) of Centrum on
a fully diluted basis (together with any warrants issued pursuant to Section
4.19 hereof, the "Warrants"). The aggregate purchase price of the Warrants is
$25.00 and, simultaneously herewith, each of you is paying the purchase price
for the Warrants that you are purchasing by wire transfer of funds. Such
Warrants are exercisable not later than March 8, 2004.
(b) Centrum and the Investors, having adverse interests
and as a result of arm's length bargaining, agree that (i) none of the
Investors nor any of their affiliates has rendered or has agreed to render any
services to Centrum in connection with this Agreement or the issuance of the
Notes and Warrants; (ii) the Warrants are not being issued as compensation; and
(iii) the aggregate fair market value of the Warrants is $25.00. Centrum and
the Investors recognize that this Agreement determines the original issue
discount to be taken into account with respect to the Notes and they agree to
adhere to this Agreement for such purposes.
(c) Simultaneously with the execution hereof, Centrum is
entering into a Put Agreement with you providing the terms and conditions upon
which you shall have the right to require Centrum to purchase the Warrants and
the Securities.
1.4 Definitions. Certain capitalized terms used herein and not
otherwise defined herein have the meanings ascribed to them in Section 8.12
hereof.
II. CONDITIONS TO CLOSING
Your obligation to purchase and pay for the Notes and the Warrants to
be sold to you at the closing of the transactions described in the Agreement
(the "Closing") is subject to the fulfillment to your satisfaction, prior to or
at the Closing, of the following conditions:
2.1 Representations and Warranties. The representations and
warranties of Centrum in this Agreement shall be correct when made and at the
time of the Closing.
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<PAGE> 7
2.2 Performance; No Default. Each Company shall have performed
and complied with all agreements and conditions contained in this Agreement
required to be performed or complied with by it prior to or at the Closing and
after giving effect to the issue and sale of the Notes and the Warrants (and
the application of the proceeds thereof as contemplated by Schedule 4.1) no
Default or Event of Default shall have occurred and be continuing.
2.3 Compliance Certificates.
(a) Officer's Certificate. Each Company shall have
delivered to you a Certificate, executed by the President of such Company and
dated the date of the Closing, certifying that (i) the conditions specified in
Sections 2.1 and 2.2 have been fulfilled and (ii) such Company is not in
default and no waiver of default is currently in effect with respect to any
obligations relating to any Indebtedness of such Company, and no event has
occurred or condition exists and is continuing with respect to any such
Indebtedness that would permit (or that with notice or the lapse of time, or
both, would permit) one or more Persons to cause such Indebtedness to become
due and payable before its stated maturity or before its regularly scheduled
dates of payment.
(b) Secretary's Certificate. Each Company shall have
delivered to you a certificate executed by the Secretary of such Company,
certifying as to the resolutions, articles of incorporation or certificate of
incorporation, as applicable, and by-laws of such Company attached thereto and
other corporate proceedings relating to the authorization, execution and
delivery of the Notes, Warrants and the other Finance Documents.
2.4 Certificate of Good Standing. Each Company shall have
delivered to you the certificate of incorporation (certified by the Secretary
of the State of its jurisdiction of incorporation) and bylaws of such Company
together with certificates of good standing with respect to such Company issued
by the Secretary of State of each jurisdiction in which the nature of its
business requires it to be qualified to do business.
2.5 Tax Clearance. Each Company shall have delivered to you a tax
clearance letter from the Department of Revenue of each jurisdiction described
in Section 2.4 relating to such Company.
2.6 Opinions of Counsel. You shall have received opinions in form
and substance satisfactory to you, dated the date of the Closing from Fuller &
Henry, covering such matters incident to the transactions contemplated hereby
and incident to the Reorganization Plan as you or your counsel may request.
2.7 Environmental Matters. Centrum shall have delivered to you
such environmental assessment reports as requested by you, and such reports
shall be satisfactory to you in all respects, and you shall have conducted and
completed all environmental due diligence reviews and examinations of the
Companies.
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<PAGE> 8
2.8 Guaranty. You shall have received the guaranty of each
Company other than Centrum in your favor, in form and substance satisfactory to
you in all respects.
2.9 Due Diligence. You shall have completed your customary due
diligence and the results thereof shall be satisfactory to you in all respects.
2.10 Approvals. You shall have obtained all necessary or
appropriate approvals from your Executive Committees or Boards of Directors to
consummate the transactions contemplated herein pursuant to the terms and
conditions contained in this Agreement and the other Finance Documents.
2.11 Sale of Other Notes. Contemporaneously with the Closing
Centrum shall sell to each of the Investors and each of the Investors shall
purchase the Notes and Warrants to be purchased by them at the Closing.
2.12 Processing Fees. In addition to the processing fees
previously paid to you, Centrum shall have paid First New England Capital
Limited Partnership the remaining portion of the processing fee due it in the
amount of $15,000 and shall have paid InvestAmerica Investment Advisors, Inc.
for allocation between MorAmerica Capital Corporation and North Dakota Small
Business Investment Company, a North Dakota Limited Partnership the remaining
portion of the processing fees due them in the amount of $10,000.
2.13 Payment of Counsel Fees. Without limiting the provisions of
Section 8.5, Centrum shall have paid on or before the Closing the fees, charges
and disbursements of your counsel to the extent reflected in a statement of
such counsel rendered to Centrum at the Closing, provided that Centrum shall
not be required to pay more than $50,000 of such fees, but you shall be
required to pay all of such charges and disbursements, even if the amount
thereof, when combined with such fees, would exceed $50,000.
2.14 Changes in Corporate Structure. Each Company shall not have
changed its jurisdiction of incorporation or been a party to any merger or
consolidation and shall not have succeeded to all or any substantial part of
the liabilities of any other entity, at any time following the date of the most
recent financial statements referred to in Section 3.5, except in accordance
with the terms set forth in the Reorganization Plan.
2.15 Absence of Adverse Change or Litigation. There has been no
material adverse change in the business, assets, operations, prospects or
condition, financial or otherwise of the Companies taken as a whole, from that
set forth in the most recent financial statements and pro forma financial
statements previously delivered to you. There is no action, proceeding or
investigation pending or threatened (nor any basis therefor known to Centrum)
(a) against the Companies, (b) against any other Person that might result,
either in any case or in the aggregate, in any material adverse change in the
condition (financial or otherwise), or the operations, management or prospects
of any Company or in its material properties and assets, or in any
4
<PAGE> 9
material liability on the part of any Company, or that challenges, or seeks to
prevent, the transactions contemplated in this Agreement or in the
Reorganization Plan.
2.16 Infusion of Equity; Bridge Notes. Prior to or
contemporaneously with the Closing, Centrum shall have raised and received at
least $1,900,000 in new capital, at lease $700,000 of which shall be from the
purchase of Common Stock pursuant to the offering described in the Confidential
Private Placement Memorandum of Centrum dated November 15, 1995, and the
remainder of which shall be in the form of bridge loans from current
shareholders of Centrum or from other individuals, which bridge loans shall be
unsecured and shall be subordinated to the Notes pursuant to subordination
agreements containing terms and conditions satisfactory to the Investors in
their sole discretion.
2.17 Subordination of Certain Existing Debt. Prior to or
contemporaneously with the Closing, Centrum shall have obtained from the
Persons listed in the sections of Schedule 3.8 entitled "Loans" and "Loans with
Warrants" and representing at least $700,000 of the aggregate principal amount
of Indebtedness described in such sections, a subordination agreement in favor
of the Investors with respect to such Indebtedness in form and substance
satisfactory to the Investors.
2.18 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement
and all documents and instruments incident to such transactions, including with
limitation the Finance Documents, shall be satisfactory to you and your
counsel, and you and your counsel shall have received all such counterpart
originals or certified or other copies of such documents as you or they may
reasonably request.
III. REPRESENTATIONS AND WARRANTIES OF CENTRUM
To induce you to purchase the Notes and the Warrants, Centrum
represents and warrants to you as to itself and, with respect to each other
Company, to the best of its knowledge and subject to the provisions of Section
4.17, (which representations and warranties shall survive the delivery of the
Notes and the Warrants) that:
3.1 Organization, Standing, etc. Each Company is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has all requisite corporate power and
authority to own, lease and operate its properties, to carry on its business as
now conducted and now proposed to be conducted, to execute, deliver and enter
into the Finance Documents, to issue and sell the Notes and Warrants and to
perform and carry out the terms of the Finance Documents.
3.2 Subsidiaries. On the date hereof, and following the
consummation of the transactions contemplated in the Reorganization Plan,
Centrum has no direct or indirect Subsidiaries other than as set forth in
Schedule 3.2, attached hereto.
5
<PAGE> 10
3.3 Qualification. Each Company is duly qualified or licensed to
do business and in good standing in each jurisdiction in which the character of
the properties owned or leased or the nature of the activities conducted makes
such qualification or licensing necessary.
3.4 Capital Stock.
(a) Schedule 3.4 attached hereto sets forth the authorized capital
stock of each Company and the number of shares of each class of such authorized
capital stock that are issued and outstanding. All outstanding shares of
capital stock of the Companies other than Centrum are owned of record and
beneficially as set forth in Schedule 3.4 and the owners of record and
beneficially of more than five percent (5%) of the outstanding capital stock of
Centrum are set forth in Schedule 3.4. Except as set forth on Schedule 3.4 and
except for the Warrants and the Notes, there are no authorized or outstanding
rights, options, warrants or agreements for the purchase from, or sale or
issuance by, the Companies of any capital stock or securities convertible into
or exchangeable for capital stock.
(b) All of the outstanding shares of capital stock of the
Companies are validly issued and outstanding, fully paid and non-assessable and
not subject to preemptive rights on the part of the holders of any class of
securities of such Company. Except for the Warrants and the Notes and as set
forth in Schedule 3.4, Centrum has no obligations or commitments to issue any
capital stock to Centrum tn any employee or other person.
(c) Centrum has duly reserved for issuance all Securities issuable
upon exercise of the Warrants and conversion of the Notes, and the Securities,
when issued in accordance with the terms of the Warrants and the Notes, will be
validly issued and outstanding, fully paid, and nonassessable, with no personal
liability attaching to the ownership thereof.
3.5 Financial Statements. You have been furnished with (a)
audited financial statements for the years, 1994 and 1995, inclusive for
Centrum, (b) management prepared internal financial statements for the nine
months ended December 31, 1995 for Centrum, and (c) audited financial
statements for the years 1993 through 1994 for McInnes Steel. All such
financial statements present fairly the financial position of the Companies and
McInnes Steel for the respective periods indicated. You have also been
furnished with financial projections for the Companies for the years 1996
through 2002, dated as of February 4, 1996; such projections are made in good
faith, and are based on factual assumptions which Centrum believes to be
reasonable in light of the economic, market, financial, political and other
information available to Centrum on February 4, 1996.
3.6 Material Adverse Changes, etc. Since December 31, 1995, (a)
there has been no change in the assets, liabilities, financial condition or
prospects of the Companies that, either in any case or in the aggregate, has
been materially adverse to the Companies; and (b) none of the condition
(financial or otherwise), operations, management or prospects of the Companies
nor any of their respective material properties or assets have been affected by
any occurrence or development (whether or not insured against) which has
materially adversely affected the
6
<PAGE> 11
Companies. Each Company is not insolvent; and, immediately after giving effect
to the issuance of the Notes and the Warrants and the consummation of the
transactions contemplated hereby, and by the Reorganization Plan, each Company
will not be insolvent.
3.7 Tax Returns and Payments. Each Company has properly prepared
and filed (subject to any properly claimed extensions) all tax returns required
by law to be filed and has paid all taxes (including installments of estimated
taxes), assessments and other governmental charges levied upon any of its
properties, assets, income or franchises, other than those not yet delinquent.
Each Company has duly withheld and collected all taxes, levies and other
assessments that it is required by law to withhold or to collect and has held
for payment or paid over such withheld amounts to the proper governmental
authorities as required by law. The charges, accruals and reserves on the
books of each Company in respect of federal, state or other taxes for all
fiscal periods are adequate. Each Company has not executed any waiver or
waivers that would have the effect of extending the applicable statute of
limitations in respect of income tax liabilities. Each Company knows of no
unpaid assessments for additional taxes for any fiscal period nor of any basis
therefor. Each Company is not being audited or challenged for any federal or
state income tax liability for any period by the Internal Revenue Service or
any state taxing authority.
3.8 Existing Indebtedness, Liens, Investments and Transactions
with Affiliates. Schedule 3.8 attached hereto correctly describes as of the
date hereof (a) all outstanding Indebtedness of the Companies in respect of
Borrowed Money, (b) all mortgages, pledges, Liens, security interests, leases,
charges and encumbrances to which any of the properties and assets of each
Company are subject, (c) all loans, advances and Investments of each Company,
and (d) all transactions with Affiliates of each Company. Each Company is not
in default and no waiver of default is currently in effect in the payment of
the principal of or interest on any Indebtedness. No waiver of default is
currently in effect with respect to any other obligations relating to any
Indebtedness of each Company. No event has occurred or condition exists and is
continuing with respect to any Indebtedness of any Company that would permit
(or that with notice or the lapse of time, or both, would permit) one or more
persons to cause such Indebtedness to become due and payable before its stated
maturity or before its regularly scheduled dates of payment.
3.9 Title and Condition of Properties; Liens.
(a) Each Company has and, upon consummation of the
transactions contemplated by this Agreement, each Company will continue to have
good and marketable title to all of its properties and assets and such
properties or assets are not and will not be upon consummation of the
transactions contemplated by this Agreement subject to any material mortgage,
pledge, Lien, security interest, lease, charge or encumbrance except for Liens
in favor of Huntington and as described in Schedule 3.9.
(b) Except as set forth in Schedule 3.9, none of the
properties or assets of the Companies are held under or subject to any lease
(except for leasehold improvements that have
7
<PAGE> 12
been or are being amortized in accordance with applicable provisions of the
Code) or as conditional vendee under any conditional sale or other title
retention agreement. Each Company enjoys peaceful and undisturbed possession
under all leases under which it operates, and all of such leases are valid,
subsisting and in full force and effect. None of such leases contains any
provision restricting incurrence of Indebtedness by the lessee, or any unusual
or burdensome provision that materially adversely affects or in the future may
(so far as Centrum can now foresee) materially adversely affect the operations
of the Companies.
(c) Without material exception, all assets used in the
business or operations of the Companies are in good operating condition and
repair, and suitable for use in the operation of the Companies, and none of
said assets that (singly or when aggregated with other assets) is material to
the business or operations of the Companies is obsolete.
3.10 Insurance. Except as set forth on Schedule 3.10, each Company
carries insurance covering its properties and business against loss from fire
and all other hazards and risks of the character usually insured against by
similar companies, and in such amounts as is customary for the type and scope
of its properties and business.
3.11 Patents, Copyrights, etc.. Except as set forth on Schedule
3.11, no patents, copyrights, trade names, trademarks, service marks, or
non-governmental licenses ("Intellectual Property Rights") are material to the
conduct of the business of the Companies as now or as proposed to be conducted.
Each Company owns or has the full right to use all such material Intellectual
Property Rights set forth on Schedule 3.11. Centrum has no knowledge, and has
not received any notice to the effect, that the manner in which each Company
conducts or proposes to conduct its business (including the use of any name,
process, method, or know-how) may infringe or conflict with the Intellectual
Property Rights of others.
3.12 Material Contracts. Except as set forth on Schedule
3.12, each Company is not a party to or obligated under, and none of the
business, properties or assets of any Company is subject to:
(a) any contract for the construction or purchase of
capital improvements, or for the purchase of any materials, supplies, or
equipment, involving the expenditure of more than $50,000;
(b) any employment, consulting, management, or
noncompetition agreement not terminable at will without liability on less than
30 days notice;
(c) any bonus, pension, retirement, profit sharing or
other plan or agreement providing for employee benefits other than group health
insurance, sick pay, and vacation pay plans for employees generally;
(d) any license, franchise, or similar agreement;
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(e) any mortgage, indenture, note, guarantee or other
obligations for or relating to Borrowed Money other than in favor of
Huntington, or, in the case of Micafil, Inc., in favor of Asea Brown Boveri,
Inc.;
(f) any contract with any labor union or association of
employees;
(g) any Guaranty, other than in favor of Huntington;
(h) any agreement, contract, or commitment that is
expected by such Company to be performed at or result in a loss, or which
materially and adversely affects the financial condition, business, properties,
or assets of such Company or the Companies taken as a whole;
(i) any lease of real or personal property material to
the operations of such Company; or
(j) any agreement with any broker, finder, investment
banker or underwriter.
Centrum has heretofore provided you with a true and complete copy of
each contract, agreement, lease, and commitment listed on Schedule 3.12 and
requested by you. Each such contract, agreement, lease or commitment is in
full force and effect, is binding upon the parties thereto, no material default
has occurred thereunder, and no event has occurred that, with the giving of
notice, the passage of time, or both, would constitute a material default
thereunder.
3.13 Litigation; Observance of Agreements, Statutes and Orders,
etc.. There is no action, proceeding or investigation pending or threatened
(nor any basis therefor known to Centrum) (a) against the Companies or any
Company or (b) against any other Person that might result, either in any case
or in the aggregate, in any material adverse change in the condition (financial
or otherwise), operations, management or prospects of any Company or in its
material properties and assets, or in any material liability on the part of any
Company. Each Company is not in default under any term of any agreement or
instrument to which it is a party or by which it is bound, or any order,
judgment, decree or ruling of any court, arbitrator or governmental, regulatory
or judicial authority, nor is it in violation of any applicable law, ordinance,
rule or regulation (including without limitation Environmental Laws) of any
governmental, regulatory or judicial authority.
3.14 Authorization and Binding Effect. The execution and delivery
of the Finance Documents and the performance of the transactions contemplated
hereby and thereby have been duly authorized by all necessary action of the
Companies. The Finance Documents constitute the legal, valid and binding
obligations of the Companies, enforceable against the Companies in accordance
with their terms.
3.15 Compliance with Other Instruments, etc.. Each Company is not
in violation of any term of its articles or certificate of incorporation, as
applicable, or by-laws, nor is any Company in violation of any indenture,
mortgage, deed of trust, loan, purchase or credit
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agreement, lease or any other agreement or instrument, or any judgment, decree,
order, statute, or governmental rule or regulation applicable to such Company
in any way that materially adversely affects or in the future may (so far as
Centrum can now foresee) materially adversely affect the condition (financial
or otherwise), operations, management or prospects of such Company; and the
execution, delivery and performance of the Finance Documents will not result in
any such violation or be in conflict with or constitute a default under any
such term, or result in the creation of any mortgage, Lien, charge or
encumbrance upon any of the properties or assets of such Company pursuant to
any such term except where such has been waived and consented to by means of
any waivers and consents delivered to you herewith. There is no such term that
materially adversely affects or in the future may (so far as Centrum can now
foresee) materially adversely affect the condition (financial or otherwise),
operations, management or prospects the Companies.
3.16 Environmental Matters.
Except as set forth on Schedule 3.16:
(a) The Companies have each substantially complied and
each is in compliance in all material respects with all Environmental Laws;
(b) The Companies have each obtained and complied and
each is in compliance in all material respects with the terms of each and every
permit, certificate, license, approval, registration or authorization
(collectively "Permits") relating to the environment or to the protection of
public health or safety from pollution or environmental contamination of any
kind that is required in connection with the conduct of its business. A list
of all Permits including the name of the granting authority, the expiration
date and a brief description thereof is set forth on Schedule 3.16;
(c) No notice, notification, demand, request for
information, citation, summons or order (collectively, "Environmental Notices")
has been received, no complaint has been filed, no penalty has been assessed
and no investigation or review is pending or threatened by any governmental or
other entity arising out of or in connection with the matters described in
subsections (a) or (b) above or arising out of or in connection with any
presence, use, generation, treatment, storage, recycling, transportation,
disposal, release or threat of release, whether or not lawful or intentional,
(as those terms are defined in federal and state laws, including without
limitation, the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response Compensation and Liability Act, the Superfund Amendments
and Reauthorization Act of 1986, the Hazardous Materials Transportation Act,
the Toxic Substances Control Act, the Clean Air Act or the Clean Water Act) of
any Hazardous Substances, whether or not such Hazardous Substance is designated
or listed in any federal, state or local environmental statutes, ordinances,
rules, regulations or orders;
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(d) To the best of Centrum's knowledge, no circumstances
exist that could give rise to any Environmental Notice or to any complaint or
penalty of the type described in subsection (c) above;
(e) The Companies have not stored any Hazardous
Substances on real properties now or formerly owned, leased or operated by
them, nor have the Companies disposed of any Hazardous Substances in a manner
contrary to any Environmental Laws.
(f) The Companies are not a party to any contract,
agreement or other commitment under which any Company is obligated to indemnify
any third party other than Huntington for any liabilities, losses or damages
(or any costs or expenses related thereto) arising out of or in connection with
any presence, use, generation, treatment, storage, recycling transportation,
disposal or release of any Hazardous Substances.
3.17 ERISA. Except as set forth in Schedule 3.17,
(a) Each Employee Benefit Plan is in material compliance
with the applicable provisions of ERISA and the Code. No Termination Event has
occurred or is reasonably expected to occur, and no condition exists, nor has
any event occurred, that could result in any Termination Event, as a result of
any of which Centrum or ERISA Affiliate could incur a material liability. If
any Employee Benefit Plan were terminated, neither Centrum nor any ERISA
Affiliate would incur any material liability. No Employee Benefit Plan that is
subject to Section 302 of ERISA or Section 412 of the Code has incurred any
"accumulated funding deficiency" (as defined in such Sections), whether or not
waived, as of the end of the most recent fiscal year of such plan ended prior
to the date hereof. No Employee Benefit Plan provides death or medical
benefits (including insured benefits) to employees beyond their retirement or
other termination of service, except death or medical benefits required by law
or death benefits under a plan qualified under section 401(a) of the Code or
death benefits under a deferred compensation arrangement accrued as liabilities
on the books of Centrum or ERISA Affiliate.
(b) Centrum and all ERISA Affiliates have made all
required contributions to Multiemployer Plans. Neither Centrum nor any ERISA
Affiliate has incurred, or would reasonably expect to incur, any Withdrawal
Liability upon a complete or partial withdrawal from any Multiemployer Plan.
To the best of Centrum's knowledge, no Multiemployer Plan is, or is reasonably
expected to be or become, insolvent, in reorganization or terminated within the
meaning of Title IV of ERISA.
(c) Neither Centrum, any ERISA Affiliate, any Person
entitled to indemnification or reimbursement from Centrum or ERISA Affiliate,
any Employee Benefit Plan, nor to Centrum's best knowledge any Multiemployer
Plan, has engaged in any transaction or conduct that could, directly or
indirectly, result in any material liability of Centrum or ERISA Affiliate of
Centrum pursuant to Sections 409, 502(i) or 4069 of ERISA or Sections 4971,
4975 or 4976 of the Code.
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(d) The consummation of the transactions contemplated by
this Agreement will not result in and prohibited transaction described in
Section 406 of ERISA or Section 4975 of the Code for which an exemption is not
available.
(e) Schedule 3.17 attached hereto is a complete and
correct list of all Employee Benefit Plans and Multiemployer Plans.
3.18 Deferred Compensation Arrangements. Except as set forth in
Schedule 3.18, attached hereto, the Companies have not entered into any
employment contracts or deferred compensation plans, incentive compensation
plans, executive compensation plans, arrangements or commitments not required
to be disclosed pursuant to Section 3.17 hereof (other than normal policies
regarding holidays, vacations and salary continuation during short periods of
illness). With respect to any such plan, arrangement or commitment:
(a) Each plan, arrangement, or commitment complies
currently, and has complied in the past, both as to form and operation with its
terms and the provisions of the Code and ERISA and all applicable laws, rules
and regulations;
(b) The disclosure and reporting provisions of the
Securities Act of 1933 and the Securities Exchange Act of 1934 have been
satisfied;
(c) Each plan and arrangement set forth in Schedule 3.18
is legally valid and binding and is in full force and effect;
(d) No contributions required to be made by any Company
under any such plan, arrangement or commitment are currently delinquent;
(e) There are no actions, suits or claims pending (other
than routine claims for benefits) or, to the best of Centrum's knowledge which
could be reasonably expected to be asserted against any such plan, arrangement,
or commitment; and
(f) Each Company has performed all obligations required
to be performed by it under each plan, arrangement, or commitment and the
Companies are not in default or in violation of, and Centrum does not have any
knowledge of any such default or violation by any other party to any and all
such plans or arrangements.
3.19 Governmental Consent, etc.. Except for the requirements of
the United States Securities and Exchange Commission, the Blue Sky laws and
regulations of the states of Connecticut, Iowa, North Dakota and Ohio and
otherwise as set forth in Schedule 3.19, no consent, approval or authorization
of, or declaration or filing with any governmental, regulatory or judicial
authority is required in connection with the execution and delivery of, or the
consummation of the transactions contemplated by, the Finance Documents or the
offer, issue, sale and delivery of the Notes and Warrants as contemplated by
this Agreement.
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3.20 Offer of Notes and Warrants. Except for (i) the offering
being made pursuant to that certain Confidential Private Placement Memorandum
of Centrum dated November 15, 1995, and (ii) notes receivable from existing
shareholders of Centrum in the initial aggregate principal amount required
under Section 2.16 hereof, neither Centrum nor any Person acting on its behalf
has directly or indirectly offered the Notes or Warrants or any part thereof or
any similar securities for issue or sale to, or solicited any offer to buy any
of the same from, anyone other than you and not more than 35 investors who are
not accredited investors as defined in Regulation D issued under the Securities
Act of 1933. Neither Centrum nor any Person acting on its behalf has taken or
will take any action that would bring the issuance and sale of the Notes and
Warrants within the provisions of Section 5 of the Securities Act of 1933, as
amended, or the registration or qualification provisions of any applicable blue
sky or other securities laws.
3.21 Investment Company Act Status. Centrum is not an "investment
company" or a company "controlled" by an "investment company," as such terms
are defined in the Investment Company Act of 1940, as amended.
3.22 Regulation U, etc.. Centrum does not own and will not use all
or any part of the proceeds of the sale of the Notes and Warrants to acquire
and has no intention of acquiring, any "margin stock" within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System (herein
called a "margin security"). The proceeds of the sale of the Notes and
Warrants will be used as provided in Section 4.1. None of such proceeds will
be used, directly or indirectly, for the purpose of purchasing or carrying any
margin security or for the purpose of reducing or retiring any Indebtedness
that was originally incurred to purchase or carry, any margin security or for
any other purpose that might constitute the transactions contemplated hereby a
"purpose credit" within the meaning of said Regulation U or cause this
Agreement to violate Regulation G, Regulation T, Regulation U, Regulation X, or
any other regulation of the Board of Governors of the Federal Reserve System,
or the Securities Exchange Act of 1934 (the "1934 Act"), each as now in effect.
3.23 Foreign Credit Restraints. Neither the consummation of the
transactions contemplated by this Agreement nor the use of the proceeds of the
sale of the Notes and Warrants will violate any provision of any applicable
statute, regulation or order of, or any restriction imposed by, the United
States of America or any authorized official, board, department,
instrumentality or agency thereof relating to the control of foreign or
overseas lending, investment or business.
3.24 Brokers, etc.. Except as set forth on Schedule 3.24, attached
hereto, neither Centrum nor any Person acting on behalf of Centrum has dealt
with any broker, finder, commission agent or other Person in connection with
the sale of the Notes and Warrants and the transactions contemplated by this
Agreement, and neither Centrum nor any such Person is under any obligation to
pay any broker's fee, finder's fee or commission in connection with such
transactions.
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3.25 Disclosure. Neither this Agreement nor any other document,
certificate or statement furnished to you by or on behalf of the Companies in
connection with the transactions contemplated hereby, taken as a whole,
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein and therein, in
the light of the circumstances under which such statements were made, not
misleading. There is no fact known to the Companies that materially adversely
affects or in the future may (so far as Centrum can now foresee) materially
adversely affect the condition (financial or otherwise), operations, management
or prospects of the Companies that has not been set forth in this Agreement or
in the other documents, certificates or statements furnished to you by or on
behalf of the Companies prior to the date hereof in connection with the
transactions contemplated hereby.
IV. AFFIRMATIVE COVENANTS
From and after the date of this Agreement until the Notes shall have
been paid in full and, in the case of Sections 4.1, 4.2(h), 4.4, 4.6, 4.8, 4.9,
4.10, 4.11 and 4.19, so long as any Warrant remains outstanding, the Companies
will duly perform and observe each and all of the covenants and agreements
hereinafter set forth:
4.1 Use of Proceeds.
(a) The proceeds of the sale of the Notes and Warrants
will be used to partially finance the acquisition of McInnes Steel as
contemplated in the Reorganization Plan, for working capital of Centrum, and to
finance those future acquisitions by Centrum of the equity or assets of other
Persons permitted under the terms of this Agreement, all as more particularly
set forth in Schedule 4.1.
(b) Centrum will not, directly or indirectly, use any
part of such proceeds for any purpose that would violate any provision of (i)
Regulation G, Regulation T, Regulation U, Regulation X or any other regulation
of the Board of Governors of the Federal Reserve System, or the 1934 Act, each
as now in effect, or (ii) any other applicable statute, regulation, rule, order
or restriction.
4.2 Financial Statements and Information. Centrum will furnish to
each of you so long as you shall hold any Note, Warrant or Security, and to
each other holder from time to time of any Note, Warrant or Security:
(a) as soon as available and in any event within 30 days
after the end of each month, a consolidated balance sheet of Centrum and its
Subsidiaries as of the end of such period, and the related consolidated
statements of income, stockholders' equity and cash flows for such period and
for the portion of such fiscal year ended on the last day of such period, in
each case setting forth in comparative form the corresponding figures for the
same period and portion of the next preceding fiscal year, all prepared in
reasonable detail and in accordance with generally accepted accounting
principles applied on a consistent basis except for the absence of
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footnotes and subject to year-end adjustments, none of which shall be material
individually or in the aggregate, and certified by the chief financial officer
of Centrum;
(b) as soon as available and in any event within 90 days
after the end of each fiscal year of Centrum, a consolidated balance sheet of
Centrum and its Subsidiaries as of the end of such year and the related
consolidated statements of income, stockholders' equity and cash flows for such
year, in each case setting forth in comparative form the corresponding figures
for the preceding fiscal year, all in reasonable detail and accompanied by the
report on such financial statements of a "big six" accounting firm or another
independent certified public accountants of national standing selected by
Centrum and acceptable to the Requisite Holders in their sole discretion, which
report (i) shall state that the audit of such accountants in connection with
such financial statements has been conducted in accordance with generally
accepted auditing standards and that such accountants believe that such audit
provides a reasonable basis for their opinion; and (ii) shall include the
opinion of such accountants without qualification as to any matter that such
financial statements present fairly in all material respects the financial
position of Centrum as of the end of such fiscal year and the results of its
operations and cash flows for such fiscal year, in conformity with generally
accepted accounting principles, except as otherwise specifically set forth in
such report;
(c) together with each delivery of financial statements
pursuant to the foregoing subsections (a) and (b), an Officers' Certificate (i)
stating that the signers are familiar with the terms of this Agreement and the
Notes and with the transactions and condition of Centrum during the fiscal
period covered by such financial statements, and that, after due inquiry, the
signers do not have knowledge of the existence, during such period or as of the
date of such Officers' Certificate, of any condition or event that constitutes
or, after notice or lapse of time or both, would constitute an Event of
Default, or, if any such condition or event existed or exists, specifying the
nature and period of existence thereof and what action Centrum has taken or is
taking or proposes to take with respect thereto, and (ii) showing in reasonable
detail and to your satisfaction all computations required to demonstrate
compliance, during and at the end of the fiscal period covered by such
financial statements, with the provisions of Article V;
(d) upon the request of the Requisite Holders, together
with each delivery of financial statements pursuant to the foregoing subsection
(b), a separate certificate of the independent certified public accountants
reporting on such financial statements (i) stating that their examination in
connection with such financial statements has been made in accordance with
generally accepted auditing standards and has included a review of the relevant
terms of this Agreement and the Notes as they relate to accounting matters, and
(ii) stating that their examination has not disclosed the existence, during or
at the end of the fiscal year covered by such financial statements, of anything
that would cause them to believe that Centrum has failed to comply with any of
the terms, covenants, provisions or conditions of any material agreement to
which the company is a party including this Agreement, and, if their
examination has disclosed such a condition or event, specifying the nature and
period of existence thereof;
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(e) promptly upon receipt thereof, copies of all reports
(including, without limitation, audit reports and so-called management letters)
or written comments submitted to the Companies by independent certified public
accountants in connection with each annual, interim or special audit in respect
of the financial statements or the accounts of the Companies made by such
accountants;
(f) not later than 30 days prior to the start of each
fiscal year of Centrum, an annual budget with detailed monthly projections for
each fiscal year made in good faith and based on reasonable factual
assumptions; such budgets shall be in a format reasonably acceptable to the
Requisite Holders, shall state the underlying assumptions, shall have been
approved by Centrum's Board of Directors, and shall be accompanied by a written
statement of Centrum's chief financial officer certifying as to such approval;
(g) such other information relating to the Companies as
from time to time may reasonably be requested by you, including, but not
limited to, copies of any and all financial information submitted by the
Companies to Huntington in accordance with the Huntington Loan Agreement; and
(h) no later than two (2) Business Days after (i) each
issuance, granting or transfer of Employee Stock Rights (capitalized terms used
but not defined in this subsection (h) shall have the respective meanings given
to them in Section 4.19 hereof), (ii) each exercise of a Note Option (whether
partial or complete), and (iii) each exercise (whether partial or complete) of
any other options, warrants, conversion rights or other rights to acquire
Common Stock (collectively, "Other Options"), a report identifying (A) the
specific Employee Stock Rights issued, granted or transferred, the specific
Note Option exercised, or the specific Other Options exercised, as the case may
be, and (B) the number of shares of Common Stock issuable or issued pursuant to
such issuance, grant, transfer or exercise, as the case may be. Such report
shall have attached thereto a copy of the instrument issuing, granting or
transferring such Employee Stock Rights, Note Option or Other Options, as the
case may be, and, in the case of a Note Option or Other Options, shall also
have attached thereto a copy of the executed instrument by which such Note
Option or Other Options has been exercised.
You and any subsequent holder of the Notes are hereby authorized to
deliver a copy of any financial statement delivered to you pursuant to this
Section 4.2 to any regulatory body having jurisdiction over you or it, as the
case may be.
4.3 Material Events and Reports. The Companies will furnish to
you (it being understood and agreed that in the event a Form 8-K is filed with
respect to any event described below, the delivery of such Form 8-K to the
Investors within two (2) days of the filing thereof shall satisfy the
requirements of this Section 4.3 with respect to such event);
(a) Prompt notice of any development, financial,
environmental or otherwise, that could materially and adversely affect the
business, properties or affairs of Centrum or of
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the Companies, taken as a whole, or the ability of the Companies to perform
their respective obligations under any of the Finance Documents;
(b) Prompt notice of any material adverse change in the
condition, financial or otherwise, of Centrum or of the Companies, taken as a
whole, or of the occurrence of any Event of Default under this Agreement, or of
the occurrence of any event that upon the giving of notice or lapse of time or
both would constitute such an Event of Default;
(c) Immediate notice by telephone (confirmed by written
notice) of (i) the occurrence of any default respecting Indebtedness of any
Company, or the Companies taken as a whole for borrowed money (including the
deferred purchase price of property) or under Capital Leases in an amount in
excess of $50,000 in the aggregate, or, as to any event that requires notice
from the holder or holders of such Indebtedness in order to constitute such
default, the receipt of such notice, or, as to the occurrence of any event that
does not require notice from the holder of such Indebtedness but that with the
lapse of time would constitute such default, the occurrence of such event, (ii)
the waiver by the holder or holders of any Indebtedness in excess of $50,000 in
the aggregate of any such default or of any such event, (iii) acceleration by
the holder or holders of any Indebtedness in excess of $50,000 in the aggregate
of the maturity thereof, and (iv) any action by the holder or holders of any
Indebtedness in excess of $50,000 in the aggregate to exercise its rights
respecting any collateral for such Indebtedness. Each Company shall,
immediately upon receipt thereof by such Company, transmit to you a copy of any
notice from any holder of such Indebtedness relating to any of the foregoing.
4.4 Inspection. Centrum will permit any individual acting on
behalf of any holder of any Note or Warrant on reasonable notice (unless a
Default or Event of Default had occurred and is continuing in which case no
prior notice shall be required) to visit and inspect any of the properties of
the Companies, to examine its and their respective books of account (and to
make copies thereof and take extracts therefrom) and to discuss their affairs,
finances and accounts with, and to be advised as to the same by, their
computer billing companies, collection agencies, officers and independent
certified public accountants, all at such reasonable times and intervals as you
may desire.
4.5 Books of Record and Account; Reserves. The Companies will:
(a) at all times keep proper books of record and account in which
full, true and correct entries shall be made of its transactions in accordance
with generally accepted accounting principles applied consistently with prior
periods to fairly reflect the financial condition of the Companies for the
periods in question; and
(b) set aside on its books from its earnings for each fiscal year
all such proper reserves, including reserves for depreciation, depletion,
obsolescence and amortization of its properties during such fiscal year, as
shall be required in accordance with generally accepted accounting principles
in connection with its business.
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4.6 Payment of Taxes; Corporate Existence; Maintenance of
Properties; Compliance with Laws; Lines of Business;
Proprietary Rights.
The Companies will:
(a) pay and discharge promptly as they become due and
payable all taxes, assessments and other governmental charges or levies imposed
upon it or its income or upon any of its property, real, personal or mixed, or
upon any part thereof, as well as all claims of any kind (including claims for
labor, materials and supplies) that, if unpaid, might by law become a Lien or
charge upon its property; provided that no Company shall be required to pay any
such tax, assessment, charge, levy or claim if the amount, applicability or
validity thereof shall currently be contested in good faith by appropriate
proceedings or other appropriate actions promptly initiated and diligently
conducted and if such Company shall have set aside on its books such reserves,
if any, with respect thereto as are required by generally accepted accounting
principles and deemed adequate by such Company and its independent certified
public accountants;
(b) do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence, rights and
franchises, provided that nothing in this subsection (b) shall prevent the
withdrawal by any Company of its qualification as a foreign corporation in any
jurisdiction, if, in the judgment of such Company, such withdrawal is in the
best interests of such Company and is not disadvantageous in any material
respect to you;
(c) maintain and keep its properties in good repair,
working order and condition, ordinary wear and tear excepted, and from time to
time make all needful and proper repairs, renewals and replacements so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times;
(d) comply with all applicable statutes, rules,
regulations and orders of, and all applicable restrictions imposed by, all
governmental authorities, domestic or foreign, in respect of the conduct of its
business and the ownership of its property (including, without limitation,
applicable statutes, rules, regulations, orders and restrictions relating to
Hazardous Substances, environmental, safety and other similar standards or
controls) and with the provisions of all leases to which it is a party or under
which it occupies property so as to prevent any loss or forfeiture thereof or
thereunder and with all other obligations that it incurs pursuant to any
contract or agreement, whether oral or written, express or implied, as such
obligations become due; provided that a Company shall not be required by reason
of this subsection to comply therewith at any time while such Company shall be
contesting its obligation to do so in good faith by appropriate proceedings or
other appropriate actions promptly initiated and diligently conducted, and if
it shall have set aside on its books such reserves, if any, with respect
thereto as are required by generally accepted accounting principles and deemed
adequate by such Company and its independent certified public accountants;
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(e) possess and maintain all material Proprietary Rights
necessary to the conduct of its business and own all right, title and interest
in and to, or have a valid license for, all material Proprietary Rights used by
it in the conduct of its business and not take any action, or fail to take any
action, that would result in the invalidity, abuse, misuse or unenforceability
of such Proprietary Rights or that would infringe upon any Proprietary Rights
of another Person.
4.7 Insurance. Each Company will maintain with financially sound
and reputable insurers insurance with respect to the properties and business of
such Company against loss or damage of the kinds customarily insured against by
corporations of established reputation engaged in the same or a similar
business and similarly situated, in such amounts (but in no event shall the
deductibles under such insurance policies exceed $5,000) and by such methods as
shall be customary for such corporations and deemed adequate by Centrum. In
addition, each Company shall obtain and maintain other insurance policies
insuring against those risks and hazards that the Requisite Holders may
designate, from such insurers and in such amounts as are acceptable to the
Requisite Holders, and Centrum shall maintain an insurance policy on the life
of George Wells with a death benefit of $1,800,000 in your favor, which death
benefit will be reduced dollar for dollar to the extent of principal repayments
on the Notes, commencing at such time as the aggregate outstanding principal
under the Notes is equal to $1,800,000 (the "Wells Insurance Policy"). The
Wells Insurance Policy shall at all times be assigned collaterally to
MorAmerica Capital Corporation as your agent, for the ratable benefit of each
of you.
4.8 Payment of Indebtedness. The Companies will:
(a) pay or cause to be paid the principal of and the
premium or other prepayment charge, if any, and interest on all Indebtedness
for borrowed money or arising under a Capital Lease or conditional sale or
other title retention agreement, whether heretofore or hereafter incurred or
assumed by it, when and as the same shall become due and payable subject to
any, applicable grace period;
(b) faithfully perform, observe and discharge all
covenants, conditions and obligations imposed on it by all instruments
evidencing such Indebtedness and all indentures and other agreements securing
such Indebtedness or pursuant to which such Indebtedness is issued; and
(c) not permit the occurrence of any act or omission that
is or may be declared to be a default under any such instrument, indenture or
agreement.
4.9 Attendance at Directors' Meetings. In addition to and not in
limitation of your rights under the Equity Holders Agreement, Centrum will
permit each of you to designate an agent or representative from time to time to
attend any and all meetings of the board of directors of Centrum and of any
committees established by such board and will give each of you prior written
notice of such meetings simultaneously with delivery of such notice to the
directors. Centrum will pay on demand all reasonable out-of-pocket expenses for
such agent or
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representatives in connection with their attendance at such meetings as
provided in Section 1.5(a) of the Equity Holders Agreement.
4.10 "C" Corporation Status. Each Company shall maintain at all
times its status as a corporation taxed pursuant to Subchapter "C" of the
Internal Revenue Code.
4.11 SBIC Information. Centrum shall permit representatives of the
Small Business Administration access to Centrum's records to confirm Centrum's
use of proceeds as specified in Section 4.1 above. Promptly after request made
by any Investor which is a small business investment company licensed under the
Small Business Investment Act of 1958, as amended (the "SBIC Act"), Centrum
shall provide such information as such Investor may request to enable such
Investor to comply with its record keeping, reporting, and other obligations
under the SBIC Act and under the regulations of the Small Business
Administration thereunder, provided that such Investor shall, if permitted
under applicable law, request that the Small Business Administration treat any
material nonpublic information supplied by such Investor as confidential.
4.12 Management Compensation. The Compensation Committee of
Centrum's Board of Directors shall develop officers' compensation guidelines,
which guidelines shall, among other things, require that all adjustments to
annual base salaries of officers shall be performance- based. During any year,
aggregate increases in the annual base salaries of officers of Centrum shall
not exceed 115% (or such greater or lesser percentage as shall be permitted by
the Huntington Loan Agreement at the relevant time of reference) above the
aggregate annual base salaries of officers of Centrum payable during the
immediately preceding year, unless the Requisite Holders have consented in
writing to such excess. Any consent granted on one occasion shall not be a
waiver of or a bar to the withholding of consent on any other occasion.
4.13 Management Succession. Centrum shall deliver to you, no later
than September 1, 1996, a plan providing for management succession, which plan
shall be satisfactory to the Requisite Holders in all respects.
4.14 Directors' and Officers' Insurance. Centrum shall, within
thirty (30) days of the Closing obtain Directors' and Officers' Insurance
covering its Board of Directors and senior executive officers in amounts and
from insurance companies satisfactory to the Requisite Holders in their sole
direction.
4.15 Environmental Compliance and Identification. Each Company
hereby indemnifies the Investors and holds the Investors harmless from and
against any loss, damage, cost, expense or liability (including strict
liability) directly or indirectly arising from or attributable to the
generation, storage, release, threatened release, discharge, disposal or
presence (whether prior to or during the term of the Notes or Warrants) of
Hazardous Substances on, under or about any real property owned, leased, or
used by any Company (the "Premises") (whether by such Company or any employees,
agents, contractors or subcontractors of such Company or any predecessor in
title or any third persons occupying or present on the Premises), or the breach
20
<PAGE> 25
of any representations and warranties regarding the Premises, including,
without limitation: (a) those damages or expenses arising under the
Environmental Laws; (b) the costs of any repair, cleanup or detoxification of
the Premises, including the soil and ground water thereof, and the preparation
and implementation of any closure, remedial or other required plans; (c) damage
to any natural resources; and (d) all reasonable costs and expenses incurred by
the Investors in connection with clauses (a), (b) and (c) including, but not
limited to a reasonable attorneys' fees.
The indemnification provided for herein shall not apply to any losses,
liabilities, damages, injuries, expenses or costs which: (i) arise from the
gross negligence or willful misconduct of the Investors, or (ii) relate to
Hazardous Substances placed or disposed of on the Premises following any
acquisition by the Investors of title to the Premises through foreclosure or
otherwise.
4.16 NASDAQ. In the event that Centrum attempts to be listed or
re-listed on the NASDAQ stock exchange, it shall, not more than ten (10) days
prior to filing its application for such listing or re-listing, notify the
Investors in writing of such application, which notice shall contain a list of
those covenants in this Agreement which, in the opinion of its securities
counsel (which opinion shall be addressed to the Investors as well as the
Company and shall be attached to such notice and which counsel shall be
acceptable to the Requisite Holders, it being understood and agreed that Fuller
& Henry shall be acceptable to the Requisite Holders), would operate as a bar
to such listing or re-listing. Such covenants shall, without any further
action by any Person, be deemed to be of no force and effect from and after the
date of such application, provided that if either (i) such listing or
re-listing does not become effective within ninety (90) days following the date
of such application or (ii) the Company thereafter withdraws or is otherwise
de-listed from NASDAQ, such covenants shall immediately be reinstated
simultaneously with the happening of either such event.
4.17 Micafil and American Handling Disclosure. Centrum shall,
within thirty (30) days following the Closing, update the schedules to this
Agreement to include such information concerning American Handling, Inc. and
Micafil, Inc. as would have been required had American Handling, Inc. and
Micafil, Inc. made the representations and warranties set forth in Article III
as of the Closing.
4.18 McInnes Steel, et al. Guaranties. At any time at which
Huntington permits any "Borrower" under the Huntington Loan Agreement or
McInnes Services, Inc. to issue its guarantee in favor of the Investors,
Centrum shall cause such Person to promptly execute and deliver such guarantee
in form and substance satisfactory to the Investors and to execute an amendment
to this Agreement in form and substance satisfactory to the Investors, wherein
such Person becomes a party to this Agreement and agrees to be bound by the
terms and conditions hereof, provided that if any covenant contained in this
Agreement would, as to such "Borrower" or McInnes Services, Inc., be more
restrictive than the comparable covenant in the Huntington Loan Documents (but
only to the extent that a comparable covenant exists therein) then the covenant
contained in this Agreement shall, as to such "Borrower" or McInnes Services,
Inc.,
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<PAGE> 26
but as to no other Person whatsoever, be deemed to be amended so as to be
substantively identical to such comparable covenant in the Huntington Loan
Documents.
4.19 Anti-Dilution.
(a) Stock Plan Adjustments.
(i) The terms defined in this Section 4.19(a)(i)
shall have the following respective meanings:
(1) "Employee Stock Rights" shall mean
options, warrants, rights to purchase Common
Stock and all other rights issued, granted or
transferred after the Closing by a Company,
Borrower (as such term is defined in Section
4.18 hereof) or Subsidiary to its employees
entitling such employees to obtain Common
Stock or securities which are directly or
indirectly convertible into Common Stock.
(2) "Pre-Threshold Event Make-Whole
Percentage " shall mean, for any Investor,
the percentage equivalent of a fraction, (A)
the numerator of which is the sum of (I) the
total number of shares issuable pursuant to
all Warrants then owned by such Investor
immediately prior to the occurrence of a
Threshold Event, plus (II) the total number
of shares of Securities then owned by such
Investor immediately prior to the occurrence
of such Threshold Event, and (B) the
denominator of which is the sum of (I) the
total number of shares of Common Stock
(including without limitation all Securities
then owned by all Investors) then outstanding
immediately prior to such Threshold Event,
plus (II) the total number of shares issuable
pursuant to all Warrants then owned by all
Investors immediately prior to the occurrence
of such Threshold Event, plus (III) the total
number of shares of Common Stock issuable
under all Employee Stock Rights existing
immediately prior to such Threshold Event.
(3) "Post-Threshold Event Make-Whole
Percentage" shall mean, for any Investor and
as of each time of determination, the
percentage equivalent of a fraction, (A) the
numerator of which is the sum of (I) the
total number of shares issuable pursuant to
all Warrants then owned by such Investor
immediately after a Threshold Issuance, plus
(II) the total number of shares of Securities
then owned by such Investor immediately after
a Threshold Issuance and (B) the denominator
of which is the sum of (I) the total number
of shares of Common Stock (including
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<PAGE> 27
without limitation all Securities then owned
by all Investors) then outstanding
immediately after a Threshold Issuance, plus
(II) the total number of shares issuable
pursuant to all Warrants then owned by all
Investors immediately after a Threshold
Issuance, plus (III) the total number of
shares of Common Stock issuable under all
Employee Stock Rights existing immediately
after a Threshold Issuance.
(4) "Stock Plan Exercise Price" shall mean,
with respect to any Employee Stock Rights,
the per share exercise price, conversion
price or purchase price for shares issuable
pursuant to such Employee Stock Rights
(5) "Threshold Issuance" shall mean each
issuance, granting or transfer of Employee
Stock Rights upon and after the occurrence of
a Threshold Event.
(6) "Threshold Event" shall mean such time
after the Closing as the Companies shall have
granted, issued or transferred Employee Stock
Rights pursuant to which with the sum of the
number shares of Common Stock issued or
issuable under all such Employee Stock Rights
equals or exceeds 630,000 shares. The shares
of Common Stock issuable or issued to George
Wells as referenced in clause (d) of Section
3.3(i) of each of the Warrants issued on the
effective date of this Agreement (the "Wells
Options") shall be included in the
calculation of such 630,000 shares.
For purposes of the definitions contained in this
Section 4.19(a)(i), all references to Warrants or
Securities "owned" by an Investor shall be deemed to
include reference to Warrants or Securities which
such Investor is entitled to own due to prior
operation of this Section 4.19 or due to exercise of
any Warrants, but which have not yet been issued
and/or delivered by Centrum to such Investor.
(ii) In no event shall the Exercise Price pursuant to
any Employee Stock Rights (other than the Wells
Options) be below $2.00 per share.
(iii) Upon and after the occurrence of a Threshold
Event, upon each Threshold Issuance, Centrum shall
simultaneously issue to each Investor one or more
Warrants pursuant to which each such Investor shall
be entitled to obtain upon the exercise thereof those
number of shares of Common Stock that, together with
the number of shares of Securities then owned by such
Investor and the number of shares of Common Stock
issuable pursuant to Warrants then owned by such
Investor, shall make
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<PAGE> 28
such Investor's Post-Threshold Event Make-Whole
Percentage equal to such Investor's Pre-Threshold
Event Make-Whole Percentage. Each such Warrant shall
be in the form and contain the provisions set forth
in Exhibit C hereto, with appropriate insertions in
the blank spaces contained in such Exhibit, except
that (A) the exercise price for such Warrant shall be
the same as the Stock Plan Exercise Price of the
Employee Stock Rights with respect to which such
Warrant was issued and (B) clause (b) of Section
3.3(i) and Section 3.5 of Exhibit C shall not be
included in any Warrants issued pursuant to this
Section 4.19 (and Section references shall be
adjusted accordingly).
(b) Note Option Adjustments.
(i) The terms defined in this Section 4.19(b)(i)
shall have the following respective meanings:
(1) "Exercise Event" shall mean each
full or partial exercise of any Note Option.
(2) "Note Option" shall mean (a) each
option to acquire shares of Common Stock
identified in Schedule 3.8 hereto under the
heading "$2,500,000 Financing", pursuant to
which the holders thereof are entitled to
acquire up to an aggregate of 480,000 shares
of such Common Stock (and all conversion
rights under each related note identified in
such Schedule) and (b) any and all other
options, warrants, rights to purchase Common
Stock and all other rights issued, granted or
transferred by a Company, Borrower (as such
term is defined in Section 4.18 hereof) or
Subsidiary to any Person entitling such
Person to obtain Common Stock or securities
which are directly or indirectly convertible
into Common Stock (collectively, "Rights"),
that have not been disclosed by the Companies
in this Agreement including without
limitation the Schedules hereto (nothing
contained herein shall be deemed a waiver of
any Event of Default or remedy therefor with
respect to any Company's failure to disclose
such Rights, nor shall the adjustments
provided for herein be deemed an adequate or
exclusive remedy for such failure or Event of
Default).
(3) "Note Option Exercise Price" shall
mean, with respect to any Note Option, the
per share exercise price, conversion price or
purchase price for shares issuable pursuant
to such Note Option.
(4) "Pre-Exercise Event Make-Whole
Percentage" shall mean for any Investor, the
percentage equivalent of a fraction, the (A)
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<PAGE> 29
numerator of which is the sum of (I) the
total number of shares issuable pursuant to
all Warrants then owned by such Investor
immediately prior to the occurrence of an
Exercise Event, plus (II) the total number of
shares of Securities then owned by such
Investor immediately prior to the occurrence
of such Exercise Event, and (B) the
denominator of which is the sum of (I) the
total number of shares of Common Stock
(including without limitation all Securities
then owned by all Investors) then outstanding
immediately prior to such Exercise Event,
plus (II) the total number of shares issuable
pursuant to all Warrants then owned by all
Investors immediately prior to the occurrence
of such Exercise Event.
(5) "Post-Exercise Event Make-Whole
Percentage" shall mean for any Investor, the
percentage equivalent of a fraction, the (A)
numerator of which is the sum of (I) the
total number of shares issuable pursuant to
all Warrants then owned by such Investor
immediately after the occurrence of an
Exercise Event, plus (II) the total number of
shares of Securities then owned by such
Investor immediately after the occurrence of
such Exercise Event, and (B) the denominator
of which is the sum of (I) the total number
of shares of Common Stock (including without
limitation all Securities then owned by all
Investors) then outstanding immediately after
such Exercise Event, plus (II) the total
number of shares issuable pursuant to all
Warrants then owned by all Investors
immediately after the occurrence of such
Exercise Event.
For purposes of the definitions contained in this
Section 4.19(b)(i), all references to Warrants or
Securities "owned" by an Investor shall be deemed to
include reference to Warrants or Securities which
such Investor is entitled to own due to prior
operation of this Section 4.19 or due to exercise of
any Warrants, but which have not yet been issued
and/or delivered by Centrum to such Investor.
(ii) Within five (5) days after each occurrence of
an Exercise Event, the Company shall issue to each
Investor one or more Warrants pursuant to which each
such Investor shall be entitled to obtain upon the
exercise thereof those number of shares of Common
Stock that, together with the number of shares of
Securities then owned by such Investor and the number
of shares of Common Stock issuable pursuant to
Warrants then owned by such Investor, shall make such
Investor's Post-Exercise Event Make-Whole Percentage
equal to such Investor's Pre-Exercise Event
Make-Whole Percentage. Each such Warrant shall be in
the form and contain the provisions set forth in
Exhibit C hereto, with appropriate
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<PAGE> 30
insertions in the blank spaces contained in such
Exhibit, except that (A) the exercise price for such
Warrant shall be the same as the Note Option Exercise
Price of the Note Option with respect to which such
Warrant was issued and (B) clause (b) of Section
3.3(i) and Section 3.5 of Exhibit C shall not be
included in any Warrants issued pursuant to this
Section 4.19 (and Section references shall be
adjusted accordingly).
(c) Benefits of Finance Documents. Each Warrant issued
pursuant to this Section 4.19 (and all Securities issued pursuant to such
Warrant) shall be entitled to the rights and benefits of the Finance Documents.
(d) No Other Issuance. Each Company other than Centrum
shall not, and Centrum shall cause its other Subsidiaries to not, issue, grant
or transfer to any Person (other than a Company or a Subsidiary) its capital
stock, or any securities which are directly or indirectly convertible into its
capital stock, or any options, warrants, or other rights to purchase its
capital stock.
V. FINANCIAL COVENANTS
From and after the date of this Agreement until the Notes shall have
been paid in full, Centrum shall (as to itself and its Subsidiaries) on a
consolidated basis:
5.1 Net Worth. Maintain at all times a consolidated Net Worth of
not less than the following amounts at the end of each fiscal year specified
below:
<TABLE>
<CAPTION>
Fiscal Year Ending Minimum Net Worth
------------------ -----------------
<S> <C>
3/31/96 $ 2,906,000
3/31/97 $ 5,153,000
3/31/98 $ 7,361,000
3/31/99 $ 9,763,000
</TABLE>
5.2 Ratio of Total Liabilities to Net Worth. Maintain at all
times a ratio of consolidated Total Liabilities to consolidated Net Worth of
not greater than the following amounts at the end of each fiscal year specified
below:
<TABLE>
<CAPTION>
Fiscal Year Ending Maximum Ratio
------------------ -------------
<S> <C>
3/31/96 10.9:1.0
3/31/97 5.4:1.0
3/31/98 3.5:1.0
3/31/99 2.4:1.0
</TABLE>
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<PAGE> 31
5.3 Fixed Charge Coverage Ratio. Maintain at all times specified
below a ratio of (a) EBITDA to (b) Fixed Charges of not less than 1.00 to 1.00.
The ratio of EBITDA to Fixed Charges of Centrum and its Subsidiaries shall be
determined (beginning with the month ending May 31, 1996) as of the last day of
each month for the twelve month period ending on such date, or, if fewer than
twelve months have occurred since April 1, 1996, for the period beginning April
1, 1996, to such date.
VI. NEGATIVE COVENANTS
From and after the date of this Agreement until the Notes shall have
been paid in full, and in the case of Section 6.6, so long as any Warrant
remains outstanding, each Company shall not, without the prior written consent
of the Requisite Holders:
6.1 Restriction on Dividends. Etc.. Make or commit to make:
(a) any dividend or other distribution, direct or
indirect, on account of any shares of such Company now or hereafter
outstanding; or
(b) any redemption, retirement, purchase or other
acquisition of its capital stock, except for repurchase of the Warrants and
Securities pursuant to the terms of the Put Agreement, and, in the event of the
death of George Wells, redemption of the Common Stock of Centrum owned by
George Wells on the date of his death, provided that such redemption shall only
be made from the proceeds of insurance policies owned by Centrum on the life of
George Wells, and provided, further, that in the case of the Wells Insurance
Policy such redemption shall only be made from any proceeds in excess of
amounts received by you or maintained in your favor pursuant to Section 4.7; or
(c) any issuance, direct or indirect, of any shares of
capital stock of the Companies now or hereafter outstanding, or of any
warrants, rights or options to acquire any such shares or require any such
issuance except (i) for the offering described in the Confidential Private
Placement Memorandum of Centrum dated November 15, 1995, (ii) pursuant to the
Warrants and the Notes, (iii) pursuant to those existing stock plans identified
in Schedule 3.4, attached hereto, to the extent permitted under Section 6.9
hereof, and under any amendments thereto permitted under Section 6.9 hereof,
(iv) the Wells Options, or (v) any other issuance permitted under Section 6.9
hereof.
6.2 Limitation on Loans, Advances and Investments. Make or own
any Investment other than:
(a) readily marketable obligations of, or fully and
unconditionally guaranteed (as to both principal and interest) by, the United
States of America and having a maturity not in excess of 12 months from the
date of acquisition thereof;
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<PAGE> 32
(b) commercial paper having a maturity not in excess of
270 days from the date of issuance thereof and having a rating of "A-1" or
better from Standard & Poor's Corporation or "P-1" or better from Moody's
Investors Service, Inc.;
(c) shares of so-called "money market funds" registered
under the Investment Company Act of 1940, as amended, organized or operating in
the United States of America, investing only in obligations of the character
described in subsections (a) and (b) of this Section 6.2;
(d) certificates of deposit issued by any bank with a
capital and surplus of at least $100,000,000 organized under the laws of the
United States of America or any state thereof (provided that such certificates
of deposit have a maturity of one year or less from the date of purchase by any
Company) and any money market account with any bank or brokerage firm organized
under the laws of the United States of America with capital and surplus of not
less than $100,000,000;
(e) accounts receivable arising from transactions in the
ordinary course of business;
(f) contingent liabilities represented by endorsements of
negotiable instruments for collection or deposit in the ordinary course of
business;
(g) advances, deposits, down payments and prepayments on
account of firm purchase orders made in the ordinary course of business;
(h) travel and other like advances to officers and
employees in the ordinary course of business;
(i) investments existing on the date hereof and listed in
Schedule 3.8 attached hereto;
(j) investments in or advances to Subsidiaries; and
(k) any distributions by a Company (other than Centrum)
to Centrum.
6.3 Restrictions on Indebtedness. Create, incur, suffer or permit
to exist, or assume or guarantee, either directly or indirectly, or otherwise
become or remain liable with respect to, any Indebtedness, except the
following:
(a) Indebtedness to the Investors arising hereunder;
(b) Indebtedness outstanding on the date of this
Agreement as set forth on Schedule 3.8 attached hereto and additional
Indebtedness not to exceed (i) $250,000 in the aggregate for all of the
Companies on an annual basis, and (ii) in the event that any "Borrower"
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<PAGE> 33
under the Huntington Loan Documents or McInnes Services, Inc. becomes a party
to this Agreement pursuant to Section 4.18 hereof, an amount with respect to
any or all of such Persons as shall be mutually agreed to by such Person and
the Requisite Holders;
(c) Indebtedness on account of current liabilities (other
than for money borrowed) incurred in the normal and ordinary course of
business;
(d) Indebtedness in respect of (i) taxes, assessments,
governmental charges or levies and claims for labor, materials and supplies to
the extent that payment thereof shall not at the time be required to be made in
accordance with the provisions of Section 4.6(a) hereof, (ii) judgments or
awards that have been in force for less than the applicable appeal period so
long as execution is not levied thereunder or in respect of which Centrum shall
at the time in good faith be prosecuting an appeal or proceedings for review in
a manner satisfactory to you and in respect of which a stay of execution shall
have been obtained pending such appeal or review, and (iii) endorsements made
in connection with the deposit of items for credit or collection in the
ordinary course of business;
(e) Indebtedness of Centrum in favor of Huntington
arising under the Huntington Loan Agreement or any Indebtedness incurred to
refinance such Indebtedness but not in excess of the outstanding principal
balance of such Indebtedness being refinanced on the date of such refinancing;
(f) Indebtedness of Centrum outstanding on the date of
this Agreement in favor of Asea Brown Boveri, Inc. arising in connection with
the financing of Micafil, Inc.'s corporate headquarters or any Indebtedness
incurred to refinance such Indebtedness but not in excess of such Indebtedness
being refinanced on the date of such refinancing; or
(g) Indebtedness of American Handling, Inc. in a maximum
original principal amount of $1,150,000 and containing terms and conditions
satisfactory to the Requisite Holders in correction with the purchase by
American Handling, Inc. of its corporate headquarters.
(h) Indebtedness of American Handling, Inc. in a maximum
original principal amount of $750,000 and containing terms and conditions
satisfactory to the Requisite Holders in connection with extensions of credit
by Huntington.
(i) Indebtedness of Micafil, Inc. in a maximum original
principal amount of $250,000 and containing terms and conditions satisfactory
to the Requisite Holders in connection with extensions of credit by Huntington.
6.4 Restriction on Liens. Create, assume, incur or suffer to
exist any mortgage, Lien, pledge, charge, security interest or other
encumbrance of any kind in respect of any property of any character of any
Company (whether owned on the date hereof or hereafter acquired) or (ii) give
its consent to the subordination of any right or claim of any Company to any
right or claim of any other Person except the following:
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<PAGE> 34
(a) Liens (other than the Lien created by Section 4068 of
ERISA) for taxes or assessments or other governmental charges or levies, to the
extent that nonpayment thereof shall be permitted by the proviso in Section
4.6(a);
(b) pledges or deposits to secure obligations under
workers' compensation laws or similar legislation, including Liens or judgments
thereunder that are not currently dischargeable;
(c) pledges or deposits to secure performance in
connection with bids, tenders, contracts (other than contracts for the payment
of money) or leases made in the ordinary course of business to which any
Company is a party as lessee (to the extent otherwise permitted by the terms of
this Agreement);
(d) deposits to secure public or statutory obligations of
any Company;
(e) materialmen's, mechanics', carriers', workers',
repairmen's or other like Liens arising in the ordinary course of business (to
the extent that such Liens are not required to be discharged under Section
4.6(a), or deposits to obtain the release of such Liens;
(f) deposits to secure or in lieu of surety, appeal or
customs bonds to which any Company is a party;
(g) Liens created by or resulting from any litigation or
legal proceeding that is currently being contested in good faith by appropriate
proceedings or other appropriate actions promptly initiated and diligently
conducted;
(h) landlord's Liens (imposed by law) under leases to
which any Company is a party;
(i) zoning restrictions, easements, licenses,
restrictions on the use of real property or minor defects or irregularities in
title thereto that (individually or in the aggregate) do not materially impair
the use of such property in the operation of the business of the Companies or
the value of such property for the purpose of such business;
(j) the liens in the Investors' favor arising under
Section 4.7 hereof;
(k) the Liens and other security interests existing on
the date hereof and securing the Indebtedness outstanding on the date hereof
and referred to in Schedule 3.8 attached hereto;
(l) Liens in favor of Huntington or any replacement
lender thereof but only to secure Indebtedness permitted by Section 6.3(e);
(m) Liens securing Indebtedness described in Schedule
6.3;
30
<PAGE> 35
(n) Liens permitted by the Huntington Loan Agreement; and
(o) Liens securing Indebtedness permitted by Sections
6.3(f), 6.3(g), 6.3(h) and 6.3(i).
6.5 Restrictions on Fundamental Changes, Dispositions or Business
Activities. (a) Sell, lease or otherwise dispose of any assets except for the
sale, lease or other disposition of inventory or other property in the ordinary
course of business, but excluding the sale, without recourse, of accounts
receivable to a factor or other financing entity; liquidate, dissolve or wind
up (or suffer any liquidation, dissolution or winding up); or (b) amend, revise
or modify any Company's articles or certificate of incorporation, as
applicable, or by-laws where such amendment, revision or modification is
materially adverse to the interests of the Investors.
6.6 Limitation on Transactions with Affiliates and Others. Engage
in any transaction with an Affiliate of the Companies or any other Person on
terms less favorable to the Companies in any material respect than would be
obtainable at the time in comparable transactions made by the Companies on an
arm's-length basis.
6.7 Limitation on Acquisitions and Mergers. Enter into any merger
or consolidation with or acquisition of all or substantially all of the assets
or capital stock of any Person.
6.8 Lines of Business. Engage, or permit its Subsidiaries to
engage, in any business other than the businesses in which they are primarily
engaged on the date of this Agreement.
6.9 Incentive Stock Plans. (i) Adopt or create any new incentive
stock plan or bonus plan with respect to any Company, (ii) issue or award any
stock, options, warrants or the like or require any such issuance to any Person
other than the Investors except in accordance with the terms of those existing
stock plans identified in Schedule 3.4, and except for the Wells Options, or
(iii) maintain the existence of those stock plans described in Schedule 3.4 (a)
in the case of American Handling, Inc. and Micafil Inc., after March 31, 1997
and (b) in the case of McInnes Steel, McInnes Services, Inc. or any "Borrower"
under the Huntington Loan Agreement, after March 31, 1999; provided, however
that, notwithstanding anything else contained in Article VI hereof, this
Section 6.9 shall cease to be in effect and binding upon the Companies at such
time as (i) the sum of (A) the total number of shares issuable upon the full
exercise of all of the then Warrants owned by each Investor, plus (B) the total
number of shares of Securities then owned by all of the Investors, is less then
fifty (50%) of (ii) the sum of, for each Warrant issued prior to the time of
determination, the total number of shares issuable upon the full exercise of
such Warrant at the time such Warrant was first issued (by way of example only
if Warrants for 100 shares of Common Stock were issued on the anniversary
hereof for each of the next three years (but before the date of determination),
the total number of shares obtained by the calculation contained in clause (ii)
of this proviso shall be 300, even if any or all of such Warrants were
partially or fully exercised prior to the date of determination).
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<PAGE> 36
VII. DEFAULT; REMEDIES
7.1 Events of Default Defined; Acceleration of Maturity. If any
one or more of the following events ("Events of Default") shall have occurred
and be continuing (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body or by operation of the
Subordination Agreement):
(a) if default shall be made in the due and punctual
payment of all or any part of principal or interest on any Note when and as the
same shall become due and payable, whether at the stated maturity thereof, by
notice of or demand for prepayment, or otherwise;
(b) if default shall be made in the performance or
observance of any covenant, agreement or condition contained in Sections 4, 5
or 6 (other than Sections 4.5, 4.6, 4.7, 4.9 (but only with respect to the
requirements thereof relating to payment), 4.10, 4.13 and 6.6, which shall be
governed by Subparagraph 7.1(c);
(c) if default shall be made in the performance or
observance of any other of the covenants, agreements or conditions contained in
this Agreement and such default shall have continued for a period of 30 days
after Centrum's receipt of written notice of such default (unless such default
is on account of failure to give a required notice, in which event such 30 day
cure period shall commence with the date of such default);
(d) if any Company shall:
(1) apply for or consent to the appointment of a
receiver, trustee or liquidator of it or any of its property;
(2) admit in writing its inability to pay its debts
as they mature;
(3) make a general assignment or trust mortgage for
the benefit of creditors;
(4) file a petition seeking relief under Title 11 of
the United States Code or under any other federal or state
bankruptcy, reorganization, insolvency, readjustment of debt,
dissolution or liquidation law or statute, or file an answer
admitting the material allegations of a petition filed against
it in any proceeding under any such law; or
(5) take corporate action for the purpose of
effecting any of the foregoing;
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(e) if an order of relief under Title 11 of the United
States Code shall be entered against any Company, or any other order, judgment
or decree shall be entered against any Company by any court of competent
jurisdiction, approving a petition seeking bankruptcy, reorganization,
readjustment of debt, dissolution, liquidation, or winding up of the company,
or appointing a receiver, trustee or liquidator of such Company, or if any
petition seeking an order of relief under Title 11 of the United States Code or
any other such petition is filed against any Company and is not stayed or
dismissed within 60 days after the date of such filing;
(f) if the Companies, either individually or in the
aggregate shall fail to make any payment due on any obligation for borrowed
money or on any other Indebtedness (other than the Notes) or on any Guaranty of
any Indebtedness or on any obligation under any lease, including, without
limitation, any Capital Lease, or under any conditional sale or other title
retention agreement in an aggregate amount in excess of $50,000, which default
continues beyond any period of grace allowed by any written instrument
evidencing such obligation; or an event shall occur that constitutes an event
of default under such instrument if the effect thereof is to cause or permit
the holder thereof to accelerate the maturity of such obligation;
(g) if final judgment for the payment of money that, to,
together with all other outstanding final judgments for the payment of money
against the Companies, either individually or in the aggregate not covered by
insurance, exceeds an aggregate of $50,000 shall be rendered by a court of
record against the Companies either individually or in the aggregate, and such
Company or Companies shall not discharge the same or provide for its discharge
in accordance with its terms, or procure a stay of execution thereof within 60
days from the date of entry thereof and within such period of 60 days, or such
longer period during which execution of such judgment shall have been stayed,
move to vacate such judgment or appeal therefrom and cause the execution
thereof to be stayed pending determination of such motion or during such
appeal;
(h) if any representation or warranty made by Centrum
herein or in any certificate or other instrument delivered under or pursuant to
any provision hereof, shall have been false or incorrect in any material
respect on the date as of which made, or shall on such date have been breached
in any material respect, as the case may be, provided, that to the extent any
such representation or warranty is qualified by a materiality standard it shall
not be further qualified as to materiality by this subsection (h);
(i) if, for any reason, including death or disability and
in case of such disability such disability shall continue for ninety (90) out
of one hundred and ten (110) consecutive days, George Wells shall fail to be
actively involved on a full time basis in the management and operation of
Centrum and a successor acceptable to the Requisite Holders shall not be in
place within (a) in the case of such disability, thirty (30) days after the one
hundred ten (110) consecutive day period described above, and (2) in all other
cases, within one hundred twenty (120) days of the cessation of George Wells to
be actively involved as described above;
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(j) if the Companies shall be in default under any other Finance
Document beyond any applicable grace period; then, in the case of an Event of
Default of the character described in subsections (a), (b), (c), (f), (g), (h),
(i), or (j) of this Section 7.1 and at the option of the Requisite Holders
exercised by written notice to Centrum, the principal of all Notes shall
forthwith become due and payable, together with interest accrued thereon,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived, and Centrum shall forthwith upon any such
acceleration pay to the holder or holders of all of the Notes then outstanding
the entire principal of and interest accrued on the Notes. Upon the occurrence
of an Event of Default of the character described in subsections (d) or (e) of
this Section 7.1, the principal of all Notes shall forthwith become due and
payable, together with interest accrued thereon, without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived
and Centrum shall forthwith upon any such acceleration pay to the holder or
holders of the Notes the entire principal of and interest accrued on the Notes.
7.2 Suits for Enforcement. In case any one or more of the Events
of Default specified in Section 7.1 shall have occurred and be continuing, you
or the holder of any Note may proceed to protect and enforce your rights either
by suit in equity or by action at law, or both whether for the specific
performance of any covenant or agreement in this Agreement or in aid of the
exercise of any power granted in this Agreement, or you or the holder of any
Note may proceed to enforce the payment of such Note or to enforce any other
legal or equitable right of the holder of such Note.
7.3 Remedies Cumulative. No remedy herein conferred upon you or
the holder of any Note is intended to be exclusive of any other remedy, and
each and every such remedy shall be cumulative and shall be in addition to
every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute or otherwise.
7.4 Remedies Not Waived. No course of dealing between the
Companies and you or the holder of any Note and no delay in exercising any
rights hereunder or under any Note shall operate as a waiver of any of your
rights or any rights of any holder of such Note.
7.5 Notice of Action by Noteholders or Claimed Defaults. If the
holder or holders of any Note shall accelerate the maturity thereof as provided
in Section 7.1, or if the holder of any Note or other obligation or security of
the Companies shall give any notice of a claimed default or Event of Default or
shall take any other action with respect to a claimed default or Event of
Default, immediately upon obtaining knowledge thereof Centrum will give each
holder of any outstanding Notes written notice specifying such action and the
nature and status of the claimed default or Event of Default.
VIII. MISCELLANEOUS
8.1 Registration, Transfer and Exchange of Notes and Warrants.
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(a) The Notes issued hereunder shall be issued in
registered form. Centrum shall keep at its principal executive office a
register in which, subject to such reasonable regulations as it may prescribe,
but at its expense (other than transfer taxes, if any), Centrum shall provide
for the registration and transfer of the Notes. Any Notes purchased by Centrum
shall be canceled, shall not be reissued, and shall not be "outstanding" as
such term is used in this Agreement.
(b) Whenever any Note shall be surrendered by the holder
thereof at the principal executive office of Centrum for transfer or exchange,
Centrum at its expense will execute and deliver in exchange therefor a new Note
or Notes as may be requested by such holder, subject to compliance with any,
legend appearing on such Note or Notes, in the same aggregate unpaid principal
amount as the aggregate unpaid principal amount of the Note or Notes so
surrendered (adjusted for the occurrence of any conversion pursuant to the
terms of the Notes and the Warrants), provided that any transfer tax relating
to such transaction shall be paid by the holder requesting the exchange. Each
such new Note shall be in registered form, shall be dated as of the date to
which interest has been paid on the unpaid principal amount of the Note or
Notes so surrendered (or dated the date of the surrendered Note or Notes if no
interest has been paid thereon), and shall be in such principal amount and
registered in such name or names as such holder may designate in writing,
provided that each Note shall be for a principal amount of at least $50,000.
Every Note presented or surrendered for registration of transfer shall be duly
endorsed, or shall be accompanied by a written instrument of transfer duly
executed, by the holder of such Note or its attorney-in-fact duly authorized in
writing.
(c) Centrum may treat the Person in whose name any Note
is registered as the owner of such Note for the purpose of receiving payment of
the principal of and interest on such Note and for all other purposes, whether
or not such Note be overdue, and Centrum shall not be affected by any notice to
the contrary except as provided in this Section 8.1.
(d) No Note or Warrant may be offered, sold or otherwise
transferred unless an opinion of counsel satisfactory to Centrum is obtained to
the effect that registration of such Note or Warrant is not required under the
Securities Act of 1933, as amended (the "Act"). Notwithstanding the foregoing
and any provision of the Warrants, any Investor, may transfer a Note or Warrant
to any other Investor or to any partner or stockholder thereof who delivers to
Centrum a written representation that the transfer is exempt from registration
under the Act.
8.2 Replacement of Lost, Stolen, Destroyed or Mutilated Notes or
Warrants. Upon receipt of evidence reasonably satisfactory to Centrum of the
loss, theft, destruction or mutilation of any Note or Warrant and, in the case
of any such loss, theft or destruction, upon delivery of an indemnity bond in
such reasonable amount as Centrum may determine (or, in the case of any Note or
Warrant held by the original holder thereof or its nominee, upon delivery of an
indemnity agreement reasonably satisfactory to Centrum), or, in the case of any
such mutilation, upon the surrender of such Note or Warrant for cancellation,
Centrum, at its expense, will execute and deliver, in lieu of such lost,
stolen, destroyed or mutilated Note or Warrant, a new Note or Warrant of like
tenor.
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<PAGE> 40
8.3 Amendment and Waiver; Offer to Purchase Notes.
(a) Any term, covenant, agreement or condition of this
Agreement, the Notes or any of the other Finance Documents may be amended, with
the consent of Centrum, or compliance therewith may be waived (either generally
or in a particular instance and either retroactively or prospectively), by one
or more substantially concurrent written instruments signed by the Requisite
Holders, except that, without the written consent of each holder of the Notes
then outstanding, no such amendment, waiver or modification shall (i) (subject
to the provisions of Section 7.1) change the amount or time of any prepayment
or payment of principle of, or reduce the rate or change the time of payment or
method of computation of interest or prepayment premium on the Notes, (ii)
change the percentage of the principal amount of the Notes the holders of which
are required to consent to any such amendment, waiver or modification, (iii)
amend or modify any of Sections 7.1, 7.3 or 8.3, (iv) change the exercise price
or time of exercise of any Warrant, or (v) release any collateral from any
security interest arising under any Finance Documents.
(b) Centrum will not solicit, request or negotiate for or
with respect to any proposed amendment or waiver of any of the provisions of
this Agreement or the Notes or with respect to any purchase of any Note by it,
directly or indirectly through an Affiliate, unless each holder of the Notes
(irrespective of the amount of Notes then owned by it) shall be informed
thereof by Centrum and shall be afforded the opportunity of considering the
same and shall be supplied by Centrum with sufficient information to enable it
to make an informed decision with respect thereto. Executed or true and
correct copies of any amendment or waiver effected pursuant to this Section 8.3
shall be delivered by Centrum to each holder of Notes forthwith following the
date on which the same shall have been executed and delivered by the holder or
holders of the requisite principal amount of outstanding Notes. Centrum will
not, directly or indirectly, pay or cause to be paid any remuneration, whether
by way of supplemental or additional interest, fee or otherwise, to any holder
of Notes as consideration for or as an inducement to the entering into by any
holder of Notes of any amendment or waiver of any of the terms and provisions
of this Agreement or any Note, or any purchase by it, directly or indirectly
through an Affiliate, of any Note unless such remuneration is concurrently
paid, on the same terms, ratably to the holders of all of the Notes then
outstanding.
(c) Any amendment or waiver pursuant to this Section 8.3
shall be binding upon all of the holders of the Notes, upon each future holder
of any Note, and upon Centrum. No notation need be made on the Notes at the
time outstanding unless requested in writing by Centrum, but any Notes executed
and delivered thereafter may, at the option of Centrum, bear a notation
referring to any such amendment or waiver then in effect.
(d) In determining whether the holders of the requisite
principal amount of outstanding Notes have given any authorization, consent or
waiver under this Section 8.3, Notes owned by Centrum or any Affiliate of
Centrum shall be disregarded and deemed not to be outstanding.
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8.4 Method of Payment of Notes. Irrespective of any provision
hereof or of the Notes to the contrary, so long as you or any other holder
shall hold any Note, Centrum agrees to make all payments of the principal of
and interest on such Note to you or such other holder at the address for such
purpose specified on Exhibit A attached hereto or at such other address as you
or such holder may designate in writing, without requiring any presentation or
surrender of such Note, except that any Note paid or prepaid in full shall be
surrendered to Centrum and canceled.
8.5 Expenses. Centrum will, on demand, pay your expenses,
including those expenses and fees incurred with respect to due diligence review
and investigation of Company in connection with your entering into the
transactions contemplated by this Agreement, and the reasonable fees and
disbursements of counsel, incident to (i) the drafting, negotiation and
preparation of the Finance Documents, (ii) any request to you for your consent
to contemplated acts not otherwise permitted pursuant to the terms of the
Finance Documents, (iii) any waiver, amendment, or modification of the terms
thereof, and (iv) collection of any sums due, or enforcement of any of the
provisions, thereunder, including court costs and reasonable attorneys' fees
and disbursements, to the extent permitted by law, provided that solely in the
case of subparagraph (i) of this Section 8.5, Centrum shall only be obligated
to pay all fees up to a maximum amount of $50,000 and shall be required to pay
all such disbursements even if the amount thereof, when added to the amount of
such fees, would exceed $50,000. This covenant shall survive the payment of
the Notes, the exercise or expiration of the Warrants and the termination of
this Agreement.
8.6 Taxes. Centrum agrees to pay all taxes and fees (including
interest and penalties), including, without limitation, all recording and
filing fees, transfer and documentary stamp and similar taxes, that may be
payable in respect of the execution and delivery of this Agreement and the
execution and delivery (but not the transfer) of the Notes, the Warrants and
the Securities or in respect of any amendment of or waiver under or with
respect to this Agreement, the Notes, the Warrants, and the Securities and will
defend, indemnify and hold harmless you and all subsequent holders of the
Notes, the Warrants and the Securities against any loss or liability resulting
from nonpayment or delay in payment of any such tax. The obligations of
Centrum under this Section 8.6 shall survive the payment of the Notes, the
exercise or expiration of the Warrants and the termination of this Agreement.
8.7 Communications. All communications provided for herein shall
be personally delivered, sent by overnight courier or faxed (provided that on
the same day a written copy thereof is personally delivered, or sent by
overnight courier), addressed as follows:
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(a) If to Centrum or any Company, at:
Centrum Industries, Inc.
6135 Trust Drive
Suite 104A
Holland, Ohio
Attn: President
Telefax No.: (419) 868-3940
with a copy to:
John W. Hilbert, II, Esq.
Fuller & Henry
One Seagate - 17th Floor
P.O. Box 2088
Toledo, OH 43604-2606
Telefax No.: (419) 247-2665
(b) If to you, at your address set forth on Exhibit A attached
hereto;
with a copy to:
Morris W. Kutcher, Esq. or James C. Schulwolf, Esq.
Pepe & Hazard
Goodwin Square
Hartford, CT 06103
Telefax No.: (203) 522-2796
(c) If to any other Person who is the holder of any Note,
at the address for the purpose of such holder as it appears on the Note
register maintained pursuant to Section 8.1.
The address of any Company may be changed at any time and from time to
time and shall be the most recent such address furnished in writing by such
Company to you and to each other Person who is the holder of any outstanding
Note. Your address for any purpose hereof or of any other Person who is the
holder of any Note outstanding hereunder may be changed at any time and from
time to time and shall be the most recent such address furnished in writing by
you or such other Person to Centrum.
Any communication provided for herein shall become effective only upon
and at the time of receipt by the Person to whom it is given.
8.8 Survival of Agreements, Representations and Warranties, etc..
All agreements, representations and warranties contained herein or made to you
in writing by or on behalf of the Companies in connection with the transactions
contemplated hereby shall survive the execution
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and delivery of this Agreement, the issue, sale and delivery of the Notes and
Warrants and payment therefor, any disposition of Notes and Warrants by you and
any investigation at any time made by you or on your behalf; however, all such
agreements, representations and warranties shall terminate as to any holder of
a Note when he/she or it no longer holds any Notes and shall in any event
terminate when the Notes are paid in full.
8.9 Successors and Assigns. This Agreement shall bind and inure
to the benefit of and be enforceable by the Companies and you, successors to
the Companies and your successors any assigns, and, in addition, shall inure to
the benefit of and be enforceable of each holder from time to time of and Note
who, upon acceptance of such Note, shall become a party to this Agreement so as
to be entitled to enforce the provisions and enjoy the benefits hereof.
8.10 Purchase for Investment. You have made certain
representations and warranties in those certain affidavits executed by each of
you and dated as of the date hereof. You understand that the Notes and
Warrants are being sold to you in a transaction that is exempt from the
registration requirements of the Securities Act of 1933, as amended, and that,
in making the representations and warranties contained in Section 3.20, Centrum
and its counsel, Fuller & Henry, are relying, to the extent applicable, upon
your representations and warranties contained therein.
8.11 Governing Law. This Agreement and the Notes and Warrants
(including the validity thereof and the rights and obligations of the parties
hereunder and thereunder) and all amendments and supplements hereof and thereof
and all waivers and consents hereunder and thereunder shall be construed in
accordance with and governed by the internal laws of the State of Connecticut
without regard to its conflicts of law rules.
8.12 Definitions.
(a) The terms defined in this Section 8.12(a), whenever
used and capitalized in this Agreement, shall, unless the context otherwise
requires, have the following respective meanings:
"Affiliate" of any Person shall mean (i) any
officer, director or shareholder of Centrum, (ii) any relative (by blood or
marriage) of any such Person, or (iii) any Person that, directly or indirectly,
controls or is controlled by or is under common control with such Person.
"Borrowed Money" shall mean any obligation to repay
money, any Indebtedness evidenced by notes, bonds, debentures, guaranties or
similar obligations and any obligation under a conditional sale or other title
retention agreement, the net aggregate rentals under any Capital Leases or any
lease that is the substantial equivalent of the financing of the property so
leased and any reimbursement obligation for any standby letter of credit.
"Business Day" shall mean a day on which commercial
banks are required to be open for business in Hartford, Connecticut, Columbus,
Ohio, and Cedar Rapids, Iowa.
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"Capital Lease" shall mean any lease or similar
arrangement which is of such nature that the payment obligations of the lessee
or obligor thereunder are required to be capitalized and shown as liabilities
upon the balance sheet of such lessee or obligor prepared in accordance with
generally accepted accounting principles.
"Centrum" shall have the meaning specified at the
beginning of this Agreement.
"Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time.
"Common Stock" shall mean any and all capital stock,
however designated, that is not limited as to amount of dividends or that is
not limited as to the amount of distributions upon liquidation or dissolution
of the Company.
"Company" or "Companies" shall have the meaning
specified at the beginning of this Agreement.
"Default" shall mean any event which, but for the
passage of time or the giving of notice, or both, would constitute an Event of
Default.
"EBITDA" shall mean for any period, (i) the sum of
the amounts for such period of (A) Net Income, (B) Interest Expense, (C)
charges for federal, state, local and foreign income taxes, (D) depreciation,
amortization expense and non-cash charges which were deducted in determining
net income, (E) extraordinary losses (and any unusual losses arising outside
the ordinary course of business not included in extraordinary losses determined
in accordance with GAAP) and (F) other non-operating expenses including,
without limitation, LIFO adjustments, which have been deducted in the
determination of net income, minus (ii) the sum of the amounts for such period
of (X) extraordinary gains (and any unusual gains arising outside the ordinary
course of business not included in extraordinary gains determined in accordance
with GAAP), (Y) other non-operating income not already excluded from the
determination of net income and (Z) to the extent not deducted from total
interest expense, any net payment received during such period under interest
rate contracts and any interest income received in respect of its cash
investments.
"Employee Benefit Plan" shall mean an "employee
benefit plan" as defined in Section 3(3) of ERISA maintained by Centrum or by
any ERISA Affiliate for employees of Centrum, any Subsidiary, Affiliate of
Centrum or ERISA Affiliate, or in which any such employees participate, other
than a Multiemployer Plan.
"Environmental Laws" shall mean any and all federal,
state, local, and foreign statutes, laws, regulations, ordinances, rules,
judgments, orders, decrees, permits, concessions, grants, franchises, licenses,
agreements or governmental restrictions relating to pollution and the
protection of the environment or the release of any materials into the
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environment, including but not limited to those related to Hazardous Substances
or wastes, air emissions and discharges to waste or public systems.
"Environmental Notices" shall have the meaning
specified in Section 3.16.
"Equity Holders Agreement" means that certain Equity
Holders Agreement of even date herewith by and among Centrum, the Investors and
the Existing Shareholders (as defined in preamble thereto).
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time, and the regulations and
rulings thereunder.
"ERISA Affiliate" shall mean each trade or business
(whether or not incorporated) that, together with Centrum, would be treated as
a single employer under Section 4001(b) of ERISA, or that is a member of a
group of which Centrum is a member and that is under common control within the
meaning of Section 414 of the Code.
"Event of Default" shall have the meaning specified
in Section 7.1.
"Existing Investments" shall mean the Investments
described in Schedule 3.8 delivered herewith.
"Finance Documents" shall mean this Agreement, the
Notes, the Guarantee, the Warrants, the Equity Holders Agreement, the Put
Agreement and the Registration Rights Agreement, each among the applicable
Company and you dated as of the date hereof, the collateral assignment of the
Wells Insurance Policy, and all other agreements, documents and instruments at
any time executed (whether concurrently herewith or subsequent to the date
hereof) and delivered by the applicable Company in connection with this
Agreement and any of the other foregoing agreements, documents or instruments.
"Fixed Charges" shall mean with respect to any
period, the sum of (a) all amounts paid or accrued or due and payable (without
duplication), for federal, state, local and foreign income taxes of Centrum and
its Subsidiaries for such period, as determined in conformity with GAAP, plus
(b) scheduled principal payments on term obligations and capital leases for
such period, plus (c) capital expenditures (net of the amounts of such capital
expenditure financed by purchase money indebtedness approved by the Investors
or permitted hereunder and the principal portion of capital lease indebtedness
permitted by this Agreement) made in accordance with the terms of this
Agreement during such period; plus (d) Interest Expense.
"GAAP" shall mean generally accepted accounting
principles, consistently applied.
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"Guarantees" shall mean the Agreement of Guarantee
of each of the Companies other than Centrum in favor of the Investors, of even
date herewith.
"Guaranty" of any Person shall mean any obligation of
such Person guaranteeing, directly or indirectly, any Indebtedness, liability
or other obligation of any other Person in any manner, but in any event
including all endorsements (other than for collection or deposit in the
ordinary course of business), all discounts with recourse and all obligations
incurred through an agreement, contingent or otherwise, (i) to purchase the
obligations of any other Person or any security therefor or to advance or
supply funds for the payment or purchase of such obligations, (ii) to purchase,
sell or lease (as lessee or lessor) property, products, materials or supplies
or to purchase or sell transportation or services, primarily for the purpose of
enabling the obligor to make payment of such obligations or to assure the owner
of such obligations against loss, regardless of the delivery or non-delivery of
the property, products, materials or supplies or the furnishing or
nonfurnishing of the transportation or services, or (iii) to provide funds for
the payment of, or obligating such Person to make, any loan, advance, capital
contribution or other investment in the obligor for the purpose of assuring a
minimum equity, asset base, working capital or other balance sheet condition
for any date or to provide funds for the payment of any obligation, dividend or
stock liquidation payment, or otherwise to supply funds to or in any manner
invest in the obligor.
"Hazardous Substances" shall mean any and all
pollutants, toxic or hazardous wastes, flammable substances, explosives,
radioactive materials or any other substances that might pose a hazard to
health or safety, the removal of which may be required or the generation,
manufacture, refining, production, processing, treatment, storage, handling,
transportation, transfer, use, disposal, release, discharge, spillage, seepage,
or filtration of which is or shall be restricted, prohibited or penalized by
any applicable law (including, without limitation, asbestos, urea formaldehyde
foam insulation and polychlorinated biphenyls).
"Huntington" shall mean The Huntington National Bank.
"Huntington Loan Agreement" shall mean that certain
Loan and Security Agreement, of even date herewith between Huntington, McInnes
Steel, Eballoy Glass Products Company, Erie Bronze & Aluminum Company, and
McInnes International, Inc.. as Borrowers, and Centrum and McInnes Services,
Inc. as Guarantors, as amended and in effect from time to time.
"Huntington Loan Documents" shall mean those
documents and instruments of even date herewith executed by the Companies or
any "Borrower" or "Guarantor" (as defined in the Huntington Loan Agreement) in
favor of Huntington, evidencing or securing the obligations described in the
Huntington Loan Agreement, as amended or in effect from time to time.
"Indebtedness" of any Person shall mean all
indebtedness, liabilities and other obligations of such Person (other than
items of shareholders' equity) that would, in
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accordance with generally accepted accounting principles, be classified upon a
balance sheet of such Person as liabilities of such Person, but in any event
including:
1. all Guaranties of such Person;
2. all indebtedness, liabilities and other
obligations secured by any mortgage, Lien, pledge, charge,
security interest or other encumbrance in respect of property
owned by such Person, whether or not such Person has assumed
or become liable for the payment of such obligations;
3. all indebtedness, liabilities and other
obligations of such Person arising under any conditional sale
or other title retention agreement, whether or not the rights
and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of
such property;
4. the amount of the obligation required to be
recorded by the lessee in respect of any Capital Lease under
which such Person is lessee; and
5. the face amount of any letter of credit issued on
behalf of Centrum.
"Interest Expense" means, for any period, as
determined in conformity with GAAP, total interest expense, whether paid or
accrued or due and payable (without duplication), including without limitation
the interest component of capital lease obligations for such period, all bank
fees, commissions, discounts and other fees and charges owed with respect to
the Letter of Credit (as defined in the Huntington Loan Agreement) and net
costs under interest rate contracts.
"Investment" shall mean any investment made by stock
purchase, capital contribution, loan, advance, acquisition of Indebtedness,
Guaranty, or otherwise.
"Lien" shall mean any interest in property securing
an obligation owed to, or a claim by, a Person other than the owner of the
property, whether such interest is based on the common law, statute or
contract, and including but not limited to the security interest lien arising
from a mortgage, encumbrance, pledge, conditional sale or trust receipt or a
lease, consignment or bailment for security purposes.
"McInnes Steel" shall mean McInnes Steel Company, a
Pennsylvania corporation.
"Multiemployer Plan" shall mean a "multiemployer
plan" as defined in section 4001(a)(3) of ERISA to which Centrum, any
Subsidiary, Affiliate of Centrum or ERISA Affiliate is making or accruing an
obligation to make contributions, or has on or after January 1, 1990, made or
accrued an obligation to make contributions.
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<PAGE> 48
"Multiple Employer Plan" shall mean each Employee
Benefit Plan that is subject to Title IV of ERISA to which Centrum, any
Subsidiary, Affiliate of Centrum or ERISA Affiliate and more than one employer
other than Centrum, a Subsidiary, Affiliate of Centrum or ERISA Affiliate is
making or accruing an obligation to make contributions, that has within any of
the preceding five plan fiscal years made or accrued an obligation to make
contributions or, in the event that any such plan has been terminated, to which
Centrum, any Subsidiary, Affiliate of Centrum or ERISA Affiliate made or accrued
an obligation to make contributions during any of the five plan fiscal years
preceding the date of termination of such plan.
"Net Income" for any period shall mean the
consolidated net income (or deficit) after taxes of Centrum and its
Subsidiaries for such period, which in accordance with GAAP would be included as
net income on the statements of income of Centrum and its Subsidiaries for such
period.
"Net Worth" shall mean shareholders' equity
determined in accordance with GAAP.
"Notes" shall have the meaning specified in
Section 1.1.
"Officers' Certificate" shall mean a certificate
signed on behalf of Centrum by the chief financial officer of Centrum.
"Permits" shall have the meaning specified in
Section 3.16.
"Person" shall mean an individual, a corporation, a
partnership, a trust, an unincorporated organization or a government or any
agency or political subdivision thereof or therein.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation, and shall also mean any successor thereto.
"Proprietary Rights" shall mean any patents,
registered and common law trademarks, service marks, trade names, copyrights,
licenses and other similar rights (including, without limitation, know-how,
trade secrets and other confidential information) and applications for each of
the foregoing, if any.
"Reorganization Plan" shall mean that certain
Agreement and Plan of Reorganization dated December 5, 1995 by and among
Company, Centrum Merging Corporation and McInnes Steel Company, as amended by
that certain Addendum No. 1 to the Agreement and Plan of Reorganization dated
February 5, 1996, and as further amended by Addendum No. 2 to the Agreement and
Plan of Reorganization dated as of March 1, 1996.
"Requisite Holders" shall mean, for so long as any
Notes are outstanding, the holder or holders of 100% or more of the aggregate
outstanding principal amount of all
44
<PAGE> 49
Notes (excluding any Note at the time held by Centrum or any Affiliate of
Centrum), and, in the event that no Notes are outstanding, the holder or
holders of 100% of the Total Shares.
"SBA" shall mean the United States Small Business
Administration established pursuant to the Small Business Act of 1958, as
amended and any public or private successor thereto.
"SBIC" shall mean a licensee under the SBIC Act.
"SBIC Act" shall mean the Small Business Investment
Act of 1958, as amended.
"Security" shall mean (i) Common Stock issued upon
exercise of a Warrant and (ii) Common Stock issued upon conversion of all or
any portion of a Note.
"Subordinated Debt" shall mean Centrum's Indebtedness
under the Notes.
"Subordination Agreement" shall mean that certain
agreement by and among Huntington and the Investors pursuant to which, subject
to terms and conditions stated therein, the investors have agreed to
subordinate certain rights under the Finance Documents to rights of Huntington
under the Huntington Loan Agreement.
"Subsidiary" shall mean any Person a majority (by
number of votes) of the voting stock of which is owned, directly or indirectly,
by Centrum or a Subsidiary of Centrum.
"Termination Event" shall mean
(i) a "reportable event" as such term is described
in Section 4043 of ERISA (other than a "reportable event" not
subject to the provision for 30-day notice to the PBGC), with
respect to any Employee Benefit Plan;
(ii) the withdrawal of Centrum, any Subsidiary,
Affiliate of Centrum or ERISA Affiliate from a Multiple
Employer Plan during a plan year in which it was a
"substantial employer," as such term is defined in Section
4001(a)(2) of ERISA, or the incurrence of liability by
Centrum, any Subsidiary, Affiliate of Centrum or ERISA
Affiliate under Section 4064 of ERISA upon the termination of
a Multiple Employer Plan;
(iii) the submission to a governmental authority of a
request for a waiver of minimum funding standards required by
ERISA or the Code, with respect to any Employee Benefit Plan;
45
<PAGE> 50
(iv) the disclosure to affected parties of a notice
of intent to terminate an Employee Benefit Plan under Section
4041 of ERISA other than in a "standard termination" within
the meaning of Section 4041 of ERISA;
(v) the institution of proceedings to terminate an
Employee Benefit Plan by the PBGC under Section 4042 of ERISA:
or
(vi) any other event or condition that might
reasonably constitute grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to
administer, any Employee Benefit Plan.
"Total Liabilities" shall mean with respect to
Centrum and its Subsidiaries (a) all indebtedness for borrowed money or for the
deferred purchase price of property or services, (b) any other indebtedness
which is evidenced by a note, bond, debenture or similar instrument, (c) all
obligations with respect to any letter of credit issued for the account of
Centrum or any of its Subsidiaries, (d) all obligations in respect of
acceptances issued or created for the account of Centrum or any of its
Subsidiaries, (e) lease obligations which, in accordance with GAAP, should be
capitalized, (f) all liabilities (including lease obligations) secured by any
lien or encumbrance on any property owned by Centrum or any of its Subsidiaries
even though such Person has not assumed or otherwise become liable for the
payment hereof, (g) all obligations of Centrum and its Subsidiaries with
respect to interest rate protection agreements (valued at the termination value
thereof computed in accordance with a method approved by the International Swap
Dealers Association), and (i) all other obligations of Centrum and its
Subsidiaries which, in accordance with GAAP, would be classified upon a balance
sheet as liabilities (except capital stock and surplus earned).
"Total Shares" shall mean shall mean, as of any date
of determination, the sum of (1) the number of shares of Common Stock which
would be acquired upon the exercise in whole of all outstanding Warrants,
taking into account any adjustments in such number of shares as provided for in
such Warrants, plus (2) the number of shares of Common Stock theretofore issued
pursuant to the exercise of Warrants, plus (3) the number of shares of Common
Stock theretofore issued pursuant to the conversion of Notes in whole or in
part.
"Warrants" shall have the meaning specified in
Section 1.3.
"Wells Insurance Policy" shall have the meaning
specified in Section 4.7 hereof.
"Wells Options" shall have the meaning specified in
Section 4.19 hereof.
"Withdrawal Liability" shall have the meaning
specified under Part 1 of Subtitle E of Title IV of ERISA.
46
<PAGE> 51
(b) The use of any gender shall include all genders. The
singular number shall include the plural and the plural the singular as the
context may require. Whenever the context may require, any pronouns used
herein shall include the corresponding masculine, feminine or neuter forms.
The words "include," "including," and "such as" shall each be construed as if
followed by the phrases "without being limited to." The words "herein,"
"hereof," "hereunder" and words of similar import shall be construed to refer
to this Agreement as a whole and not to any particular Section hereof unless
expressly so stated. The word "you" shall be construed to refer to each
Investor. The section headings herein are for convenience of reference only
and shall not affect in any way the interpretation of any of the provisions
hereof.
(c) All accounting terms used herein that are not
expressly defined in this Agreement shall have the respective meanings given to
them in accordance with generally accepted accounting principles. Except as
otherwise provided in this Agreement, all computations made pursuant to this
Agreement shall be made in accordance with generally accepted accounting
principles as in effect from time to time and all balance sheets and other
financial statements shall be prepared in accordance with generally accepted
accounting principles.
8.13 Waiver of Trial by Jury. CENTRUM HEREBY EXPRESSLY WAIVES ANY
AND ALL RIGHTS IT MAY HAVE TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, OR
CAUSE OF ACTION (1) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (2) IN
ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL, TO THE DEALINGS OF THE PARTIES
HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE
TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND
CENTRUM HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION, OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND YOU MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS
WRITTEN EVIDENCE OF COMPANY S CONSENT TO THE WAIVER OF ITS RIGHT TO TRIAL BY
JURY EXCEPT AS PROHIBITED BY LAW. CENTRUM WAIVES ANY RIGHT WHICH IT MAY HAVE
TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER
THAN, OR IN ADDITION TO, ACTUAL DAMAGES. Centrum (a) certifies that neither you
nor any of your representatives, agents or attorneys has represented, expressly
or otherwise, that you would not, in the event of litigation, seek to enforce
the foregoing waivers, and (b) acknowledges that, in entering into the this
Agreement and the other Finance Documents you are relying upon, among other
things, the Waivers and certifications contained in this Section 8.13.
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<PAGE> 52
8.14 Prejudgment Remedy Waiver. TO INDUCE YOU TO ACCEPT THIS
AGREEMENT, CENTRUM AGREES THAT THE TRANSACTIONS EVIDENCED BY THE NOTES, THIS
AGREEMENT AND ALL OTHER FINANCE DOCUMENTS ARE AND EVIDENCE A COMMERCIAL
TRANSACTION AND NOT A CONSUMER TRANSACTION AND WAIVES ANY RIGHT TO A NOTICE AND
HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, AS AMENDED OR
ANY OTHER JURISDICTION AFFECTING PREJUDGMENT REMEDIES AND AUTHORIZES YOUR
ATTORNEY TO ISSUE A WRIT FOR A PREJUDGMENT REMEDY WITHOUT COURT ORDER PROVIDED
THE COMPLAINT SHALL SET FORTH A COPY OF THIS WAIVER AND WAIVES ANY CLAIM IN
TORT, CONTRACT OR OTHERWISE AGAINST YOUR ATTORNEY WHICH MAY ARISE OUT OF SUCH
ISSUANCE OF THE WRIT FOR A PREJUDGMENT REMEDY WITHOUT COURT ORDER. CENTRUM
ACKNOWLEDGES AND STIPULATES THAT SUCH WAIVER AND AUTHORIZATION GRANTED ABOVE
ARE MADE KNOWINGLY AND FREELY AND AFTER FULL CONSULTATION WITH COUNSEL.
SPECIFICALLY, CENTRUM RECOGNIZES AND UNDERSTANDS THAT THE EXERCISE OF YOUR
RIGHTS DESCRIBED ABOVE MAY RESULT IN THE ATTACHMENT OF OR LEVY AGAINST
CENTRUM'S PROPERTY, AND SUCH WRIT FOR A PREJUDGMENT REMEDY WILL NOT HAVE THE
PRIOR WRITTEN APPROVAL OR SCRUTINY OF A COURT OF LAW OR OTHER JUDICIAL OFFICER
NOR WILL CENTRUM HAVE THE RIGHT TO ANY NOTICE OR PRIOR HEARING WHERE CENTRUM
MIGHT CONTEST SUCH A PROCEDURE. THE INTENT OF CENTRUM IS TO GRANT YOU FOR GOOD
AND VALUABLE CONSIDERATION THE RIGHT TO OBTAIN SUCH A PREJUDGMENT REMEDY AND TO
ASSURE THAT ANY SUCH PREJUDGMENT REMEDY OBTAINED IS VALID AND CONSTITUTIONAL.
8.15 Limitation of Interest. It is the intent of the Companies and
the Investors in the execution of this Agreement and the Notes and all other
instruments securing the Notes to contract in strict compliance with the usury
laws of the state governing the loans evidenced by the Notes. In furtherance
thereof, each Investor and the Companies stipulate and agree that
notwithstanding anything contained herein, in the Notes or in the other Finance
Documents, none of the terms and provisions contained in the Finance Documents
shall ever be construed to create a contract for the use, forbearance or
detention of money requiring payment of interest at a rate in excess of the
maximum interest rate permitted to be charged by the laws of the state
governing the loans evidenced by the Notes. In the event it is determined that
any holder of any Note has collected monies which are deemed to constitute
interest and are deemed to increase the effective interest rate on such Note to
a rate in excess of that permitted to be charged by the laws of the state
governing the loans evidenced by the Notes, all such sums shall be applied to
reduce the outstanding principal amount of such Note to zero. Any excess
thereafter shall be refunded to Centrum. All sums paid or agreed to be paid to
the holder of any Note for the use, forbearance or detention of the
indebtedness of Company evidenced thereby, outstanding from time to time shall,
to the extent permitted by applicable law, and only to the extent necessary to
preclude exceeding the limit of validity prescribed by law, be amortized,
pro-rated, allocated and spread from the date of disbursement of the proceeds
of such Note until payment in full of
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<PAGE> 53
such Note so that the actual rate of interest on account of such indebtedness
is uniform throughout the balance of the term hereof.
8.16 Miscellaneous. Except for the Finance Documents, this
Agreement embodies the entire agreement and understanding between you and the
Companies and supersedes all prior agreements and understandings relating to
the subject matter hereof. In case any provision in the Notes, Warrants or
this Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby. This Agreement may be executed in any number of
counterparts and by the parties hereto on separate counterparts but all such
counterparts shall together constitute but one and the same instrument. This
Agreement may be reproduced by any photographics, photostatic, microfilm,
micro-card, miniature photographic, facsimile or other similar process and the
original thereof may be destroyed. The parties agree that any such
reproduction shall to the extent permitted by law, be as admissible in evidence
as the original itself in any judicial or administrative proceeding (whether or
not the original is in existence and whether or not the reproduction was made
in the regular course of business) and that any enlargement, facsimile or
further reproduction shall likewise be admissible in evidence.
8.17 (a) If you are in agreement with the foregoing please
sign below, whereupon this letter shall become a binding agreement under seal
between you and the Companies.
Very truly yours,
CENTRUM INDUSTRIES, INC.
By /s/ George H. Wells
-----------------------------------
George Wells
Title: President
(Duly Authorized)
AMERICAN HANDLING, INC.
By /s/ George H. Wells
-----------------------------------
Print Name:
Title:
MICAFIL, INC.
By /s/ George H. Wells
-----------------------------------
Print Name:
Title:
49
<PAGE> 54
The foregoing Agreement is hereby agreed to as of the date thereof.
FIRST NEW ENGLAND CAPITAL LIMITED
PARTNERSHIP
By: FINEC Corp., its General Partner
By: /s/ Richard C. Klaffky
----------------------------------
Richard Klaffky
Its President
MORAMERICA CAPITAL CORPORATION
By: InvestAmerica Investment Advisors,
Inc., its Investment Advisor
By: /s/ David Schroder
----------------------------------
David Schroder
Its President
NORTH DAKOTA SMALL BUSINESS
INVESTMENT COMPANY, A NORTH DAKOTA
LIMITED PARTNERSHIP
By: InvestAmerica ND Management, Inc.
its Investment Advisor
By: /s/ David Schroder
----------------------------------
David Schroder
Its President
50
<PAGE> 55
EXHIBIT A
Names and Addresses of Investors Notes Purchased
-------------------------------- ---------------
First New England Capital Limited Partnership $750,000
100 Pearl Street
Hartford, CT 06103
Attn: Richard Klaffky, President
MorAmerica Capital Corporation $1,254,890
c/o InvestAmerica Investment Advisors, Inc.
101 2nd Street, S.E., Suite 800
Cedar Rapids, IA 52401
Attn: David Schroder, President
North Dakota Small Business Investment Compa- $495,110
ny, a North Dakota Limited Partnership
c/o InvestAmerica ND Management, Inc.
101 2nd Street, S.E., Suite 800
Cedar Rapids, IA 52401
Attn: David Schroder, President
<PAGE> 1
EXHIBIT 10.4
COMMON STOCK WARRANT
March 8, 1996
NEITHER THIS WARRANT, NOR THE STOCK TO BE ISSUED UPON EXERCISE HEREOF, HAS BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 SECURITIES
ACT"), OR QUALIFIED OR REGISTERED UNDER ANY STATE SECURITIES LAWS (THE "STATE
SECURITIES LAWS"), AND THIS WARRANT HAS BEEN, AND THE COMMON STOCK TO BE ISSUED
UPON EXERCISE HEREOF WILL BE, ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO,
OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF. NO SUCH SALE OR
OTHER DISPOSITION MAY BE MADE WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE 1933 SECURITIES ACT AND COMPLIANCE WITH THE APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE ISSUER AND ITS
COUNSEL, THAT SAID REGISTRATION IS NOT REQUIRED UNDER THE 1933 SECURITIES ACT
AND THAT APPLICABLE STATE SECURITIES LAWS HAVE BEEN COMPLIED WITH.
WARRANT
Void after March 8, 2004
No. 2 Warrant to Purchase Common Stock
$.05 Par Value
This certifies that MORAMERICA CAPITAL CORPORATION ("Purchaser"),
having an address of c/o InvestAmerica Investment Advisors, Inc., 101 2nd
Street S.E., Suite 800, Cedar Rapids, Iowa 52401, or any party to whom this
Warrant is assigned in compliance with the terms hereof (Purchaser and any such
assignee being hereafter sometimes referred to as "Holder"), is entitled to
subscribe to and purchase, (i) during the period commencing at the date first
set forth above and ending at 5 p.m. Toledo, Ohio local time, on the
"Expiration Date" (as defined below), SIX HUNDRED TWENTY-SEVEN THOUSAND FOUR
HUNDRED FORTY-FIVE (627,445) shares of fully paid and nonassessable Common
Stock (as hereinafter defined of CENTRUM INDUSTRIES, INC. (the "Company"), a
Delaware corporation with its principal place of business at 6135 Trust Drive,
Suite 104A, Holland, Ohio 43528. This Warrant is one of a series of Warrants
identical in form issued by the Company pursuant to the Agreement (as defined
below), and the Holder, by acceptance hereof, agrees to be bound by the
provisions of such Agreement as applicable to this Warrant. The purchase price
of each such share of Common Stock shall be the Warrant Price as defined below.
This Warrant was originally issued to Purchaser pursuant to the Agreement (as
defined below).
<PAGE> 2
ARTICLE I
DEFINITIONS
1.1 "Aggregate Price" shall mean the product, at any time of reference, of
(i) the Warrant Price multiplied by (ii) the number of shares of
Warrant Stock.
1.2 "Agreement" shall mean that certain Note and Warrant Purchase
Agreement entered into by and between Purchaser, among others, and the
Company of even date herewith.
1.3 "Common Stock" shall mean and include the Company's common stock, par
value $.05, as constituted on the date hereof, and shall also include
any capital stock of any class or series of the Company's hereafter
authorized which shall substitute for or replace the Common Stock as
constituted on the date hereof; provided, however, that in the event
the Company authorizes one or more classes or series of capital stock
qualifying as "Common Stock" for purposes of the foregoing definition,
in addition to the class of authorized capital stock denominated as
"Common Stock" in the Company's Certificate of Incorporation as of the
date hereof, the Holder shall have the right to designate at each time
it exercises its rights hereunder the class or series of authorized
capital stock that it elects to purchase in satisfaction of its rights
hereunder.
1.4 "Common Stock Equivalents" shall mean Convertible Securities and
Rights.
1.5 "Convertible Securities" means any securities which are directly or
indirectly convertible into Common Stock.
1.6 "Effective Price" means the quotient obtained by dividing (i) Minimum
Consideration by (ii) Maximum Shares Upon Exercise.
1.7 "Expiration Date" means March 8, 2004.
1.8 "Maximum Shares Upon Exercise" means the maximum number of shares of
Common Stock issuable under a Common Stock Equivalent upon complete
exercise and full conversion of all Rights or Convertible Securities
represented thereby, computed without regard to contingent adjustments
to the number of shares issuable upon exercise and conversion.
1.9 "Minimum Consideration" means the minimum aggregate consideration paid
or payable at any time for the purchase of the Common Stock
Equivalents during the term of the Common Stock Equivalents, and upon
complete exercise and full conversion of the Common Stock Equivalents,
computed without regard to contingent adjustments to exercise or
conversion price.
2
<PAGE> 3
1.10 "Notes" means the Company's 11% Convertible Subordinated Notes due
March 31, 2001, one or more of which has been issued by the Company
on the date hereof to the Purchaser, among others, together with any
note issued in exchange therefor or replacement thereof.
1.11 "Rights" means any options, warrants, or rights to purchase Common
Stock or Convertible Securities.
1.12 "Warrant Price" shall mean Two and 00/100 ($2.00) Dollars for each
share of Common Stock subject, however, to reduction pursuant to
Section 3.5 hereof.
1.13 "Warrant Stock" shall mean 627,445 shares of Common Stock, subject to
reduction as provided in Section 2.2 hereof.
ARTICLE II
EXERCISE AND PAYMENT
2.1 Cash Exercise. The purchase rights represented by this Warrant may be
exercised by Holder, in whole or in part, by written notice of
exercise delivered to the Company at least twenty (20) days prior to
the intended date of exercise and by the surrender of this Warrant at
the principal office of the Company, and by the payment to the
Company, by certified, cashier's or other check acceptable to the
Company, of an amount equal to the aggregate Warrant Price of the
shares being purchased.
2.2 Deemed Exercise Upon Conversion of Notes. In lieu of exercising this
Warrant pursuant to Section 2.1, Holder may elect to convert all or a
portion of the outstanding principal balance of any of the Notes into
shares of Common Stock at a conversion price equal to the Warrant
Price pursuant to the terms of such Note, in which event this Warrant
shall be deemed, without further act or instrument, to have been
exercised for a number of shares of Common Stock equal to the number
of shares of Common Stock received by the Purchaser upon such
conversion, and the number of shares of Warrant Stock subject to this
Warrant shall be reduced by an equal number of shares, and this
Warrant shall remain in full force and effect with respect to such
reduced number of shares of Warrant Stock. The foregoing conversion
shall be effected by delivery of a written notice to the Company at
least twenty (20) days prior to the intended date of conversion
specifying the amount of outstanding principal to be converted. By
way of example and illustration only, if the Purchaser elects to
convert $100,000 of the outstanding principal balance of a Note and
receives 50,000 shares of Common Stock upon such conversion, the
number of shares of Warrant Stock subject to this Warrant shall be
reduced from 627,445 to
3
<PAGE> 4
577,445 and this Warrant shall remain in full force and effect with
respect to such 577,445 shares of Warrant Stock.
2.3 Stock Certificate. In the event of any exercise of the rights
represented by this Warrant, certificates for the shares of Common
Stock so purchased shall be delivered to Holder within a reasonable
time and, unless this Warrant has been fully exercised or has expired,
a new Warrant representing the number of shares of Common Stock with
respect to which this Warrant shall not have been exercised shall also
be issued to Holder within such time.
2.4 Stock Fully Paid; Reservation of Shares. The Company covenants and
agrees that all Common Stock which may be issued upon the exercise of
the rights represented by this Warrant will, upon issuance, be fully
paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof (excluding taxes based on the income of
Holder), provided that any such shares of Common Stock shall be
subject to the restrictions, obligations and duties imposed upon
stockholders of the Company pursuant to that certain Equity Holders'
Agreement, of even date herewith, among the Company and the Purchaser,
among others, as the same may be amended and supplemented to and
including the date hereof (the "Equity Holders' Agreement"), and shall
be subject to applicable restrictions imposed by relevant federal and
state securities laws relating to capital stock sold in a private
placement. The Company further covenants and agrees that during the
period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized and reserved
for issuance a sufficient number of shares of its Common Stock as
would be required upon the full exercise of the rights represented by
this Warrant.
2.5 Fractional Shares. No fractional share of Common Stock will be issued
in connection with any exercise hereof, but in lieu of a fractional
share upon complete exercise hereof, Holder may purchase a whole share
at the then effective Warrant Price.
ARTICLE III
CERTAIN ADJUSTMENTS OF NUMBER OF
SHARES PURCHASABLE AND WARRANT PRICE
The number and kind of securities purchasable upon the exercise of
this Warrant and the Warrant Price shall be subject to adjustment from time to
time upon the occurrence of certain events, as follows:
3.1 Reclassification, Consolidation or Merger. In case of: (i) any
reclassification or change of outstanding securities issuable upon
exercise of this Warrant; (ii) any consolidation or
4
<PAGE> 5
merger of the Company with or into another corporation (other than a
merger with another corporation in which the Company is a continuing
corporation and which does not result in any reclassification, change
or exchange of outstanding securities issuable upon exercise of this
Warrant); or (iii) any sale or transfer to another corporation of all,
or substantially all, of the property of the Company, then, and in
each such event, the Company or such successor or purchasing
corporation, as the case may be, shall execute a new Warrant which
will provide that Holder shall have the right to exercise such new
Warrant and purchase upon such exercise, in lieu of each share of
Common Stock theretofore issuable upon exercise of this Warrant, the
kind and amount of securities, money and property receivable upon such
reclassification, change, consolidation, merger, sale or transfer by a
holder of one share of Common Stock issuable upon exercise of this
Warrant had this Warrant been exercised immediately prior to such
reclassification, change, consolidation, merger, sale or transfer.
Such new Warrant shall provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided in
this Section 3 and the provisions of this Section 3.1, shall similarly
apply to successive reclassifications, changes, consolidations,
mergers, sales and transfers.
3.2 Subdivision or Combination of Shares. If the Company shall at any
time while this Warrant remains outstanding and unexercised in whole
or in part: (i) divide its Common Stock, the Warrant Price shall be
proportionately reduced; or (ii) combine shares of is Common Stock,
the Warrant Price shall be proportionately increased.
3.3 Adjustment for Issue or Sale of Shares at Less Than the Warrant Price.
If, in a transaction other than an issuance excepted from these
provisions as set forth below or an issuance that causes an adjustment
under Sections 3.1 or 3.2, the Company shall at any time or from time
to time, issue any additional shares of Common Stock without
consideration or for a net consideration per share less than the
Warrant Price in effect immediately prior to such issuance, then, and
in each case, the Warrant Price shall be lowered to an amount equal to
the lowest per share price received, or deemed received, by the
Company as consideration for such Shares.
For purposes of this Section 3.3:
(i) There shall be no adjustment under this Section 3.3
for any sales or issuances: (a) in a transaction in
which an adjustment will be made pursuant to Section
3.1 or 3.2; or (b) upon exercise or conversion of
Common Stock Equivalents outstanding on the original
date of issuance of this Warrant; or (c) pursuant to
that certain Confidential Private Placement
Memorandum of the Company dated November 15, 1995 for
the sale of up to 2,400,000 shares of the Company's
common stock at a price of $1.50 per share; or (d)
upon the Company's granting to George
5
<PAGE> 6
Wells, no later than ninety (90) days after March 31,
1996 fiscal year at the discretion of the
Company's Board of Directors, based upon satisfaction
of certain incentive goals, an option or options to
purchase up to 150,000 shares of the Company's common
stock at a price of $1.50 per share;
(ii) The issuance of Common Stock Equivalents shall be
deemed an issuance at such time of the shares of
Common Stock underlying the Common Stock Equivalents.
If the Effective Price shall be less than the Warrant
Price at the time of such issuance, then an
adjustment in the Warrant Price shall be made upon
each such issuance in the manner provided in this
Section 3.3. No adjustment of the Warrant Price shall
be made under this Section 3.3 upon the issuance of
shares of Common Stock upon the exercise or
conversion of Common Stock Equivalents if an
adjustment has previously been made as above
provided. Any adjustment of the Warrant Price shall
be disregarded, if, as and when such Common Stock
Equivalents expire or are cancelled without being
exercised so that the Warrant Price effective
immediately upon such cancellation or expiration
shall be equal to the Warrant Price in effect at the
time of the issuance of the expired or cancelled
Common Stock Equivalents, with such additional
adjustments as would have been made to the Warrant
Price had the expired or cancelled Common Stock);
Equivalents not been issued.
3.4 Other Action Affecting Common Stock. (a) If the Company takes any
action affecting its Common Stock after the date hereof (including
dividends and distributions), other than an action described in any of
Sections 3.1 and 3.2 hereof, which would have a material adverse
effect upon Holder's rights hereunder, the Warrant Price shall be
adjusted downward in such manner and at such time as the Board of
Directors of the Company shall in good faith determine to be equitable
under the circumstances.
(b) In case the Company shall make any distribution of
its assets to holders of its Common Stock as a liquidation or partial
liquidation dividend or by ways of return of capital, or other than as
a dividend payable out of earnings or surplus legally available for
dividends under the laws of the state of incorporation of the Company,
and Holder exercises this Warrant within thirty (30) days after the
later of (i) the record date for the determination of the holders of
Common Stock entitled to such distribution of assets and (ii) the date
upon which notice of such distribution is delivered by the Company to
Holder, Holder shall be entitled to receive, for no additional
consideration, in addition to the Warrant Stock, the amount of such
assets (or, at the option of the Company. a sum equal to the value
thereof at the time of such distribution, such value to be determined
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by the Board of Directors of the Company in good faith) that would
have been payable to the Holder had it been the holder of record of
the Warrant Stock on such record date.
(c) In case the Company shall liquidate or wind up its
affairs, the Holder shall be entitled, upon the exercise hereof, to
receive, in lieu of the shares of Warrant Stock; that the Holder would
have been entitled to receive, the same kind and amount of assets as
would have been issued, paid or otherwise distributed to the Holder
upon such dissolution, liquidation or winding up with respect to such
shares of Warrant Stock, had the Holder been the holder of record of
such shares of Warrant Stock on the record date for the determination
of those entitled to receive any such distribution; provided, however,
that all rights under this Warrant shall terminate on a date fixed by
the Company, such date to be not earlier than the date of commencement
of proceedings for dissolution, liquidation or winding up and not
later than thirty (30) days after such date of commencement, unless
the Holder shall have, prior to such termination date, exercised this
Warrant. Written notice of such termination of rights under this
Warrant shall be given to the Holder at least thirty (30) days prior
to such termination date.
3.5 Adjustment with Respect to Common Stock Offering. The Company shall
complete an offering of its common stock within the period ending
February 28, 1997. If such offering shall result in the Company's
receipt by such date of aggregate proceeds (after deduction of
offering expenses) in an amount less than $1,800,000, then, effective
March 1, 1997, the Warrant Price per share shall be reduced by an
amount equal to the product of (i) $0.50, multiplied by the difference
between (A) 1 and (B) the decimal equivalent of a fraction, the
numerator of which is the amount of aggregate proceeds (net of
offering expenses) received by the Company by February 28, 1997, and
the denominator of which is $1,800,000. The Warrant Price shall not be
adjusted pursuant to this Section 3.5 if the aggregate proceeds (after
deduction of offering expenses) received by the Company by such date
as a result of such offering exceeds $1,800,000.
3.6 Time of Adjustments to the Warrant Price. All adjustments to the
Warrant Price and the number of shares purchasable hereunder, unless
otherwise specified herein, shall be effective as of the earlier of:
(i) the date of issue (or date of sale, if earlier) of
the security causing the adjustment;
(ii) the effective date of a division or combination of
shares;
(iii) the record date of any action of holders of the
Company's capital stock of any class taken for the
purpose of dividing or combining shares or entitling
shareholders to receive a distribution or dividends.
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3.7 Notice of Adjustments. In each case of an adjustment in the Warrant
Price and the number of shares purchasable hereunder, the Company, at
its expense, shall cause the Treasurer or chief financial officer of
the Company to compute such adjustment and prepare a certificate
setting forth such adjustment and showing in detail the facts upon
which such adjustment is based. The Company shall promptly mail a copy
of each such certificate to Holder pursuant to Section 6.9 hereof.
3.8 Duration of Adjusted Warrant Price. Following each adjustment of the
Warrant Price such adjusted Warrant Price shall remain in effect until
a further adjustment of the Warrant Price.
3.9 Adjustment of Number of Shares. Upon each adjustment of the Warrant
Price pursuant to this Section 3, the number of shares of Warrant
Stock shall be adjusted to the nearest whole share, to the number
obtained by dividing the Aggregate Price by the Warrant Price as
adjusted.
ARTICLE IV
TRANSFER, EXCHANGE AND LOSS
4.1 Transfer. This Warrant is transferable on the books of the Company at
its principal office by the registered Holder hereof upon surrender of
this Warrant properly endorsed, subject to compliance with federal and
state securities laws. The Company shall issue and deliver to the
transferee a new Warrant or Warrants representing the Warrants so
transferred. Upon any partial transfer, the Company will issue and
deliver to Holder a new Warrant or Warrants with respect to the
Warrants not so transferred. Notwithstanding the foregoing, Holder
shall not be entitled to transfer a number of shares or an interest in
this Warrant representing less than five percent (5%) of the aggregate
shares initially covered by this Warrant. Any transferee shall be
subject to the same restrictions on transfer with respect to this
Warrant as the Purchaser.
4.9 Securities Laws. Upon any issuance of shares of Common Stock upon
exercise of this warrant, it shall be the Company's responsibility to
comply with the requirements of: (1) the 1933 Securities Act; (2) the
Securities Exchange Act of 1934, as amended; (3) any applicable
listing requirements of any national securities exchange; (4) any
state securities regulation or "Blue Sky" laws; and (5) requirements
under any other law or regulation applicable to the issuance or
transfer of such shares. If required by the Company, in connection
with each issuance of shares of Common Stock upon exercise of this
Warrant, the Holder will give: (i) assurances in writing, satisfactory
to the Company, that such shares are not being purchased with a view
to the distribution thereof in violation of applicable laws, (ii)
sufficient information, in writing, to enable the
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Company to rely on exemptions from the registration or qualification
requirements of applicable laws, if available, with respect to such
exercise, (iii) the legal opinion required by the restrictive legend
set forth at the beginning of this Warrant, and (iv) its cooperation
to the Company in connection with such compliance.
4.3 Exchange. Subject to compliance with applicable federal and state
securities laws, this Warrant is exchangeable at the principal office
of the Company for Warrants to purchase the same number of shares of
Common Stock purchasable hereunder, each new Warrant to represent the
right to purchase such number of shares of Common Stock as Holder
shall designate at the time of such exchange. Each new Warrant shall
be identical in form and content to this Warrant, except for
appropriate changes in the number of shares of Common Stock covered
thereby, the aggregate purchase price of such shares, the percentage
stated in Section 4.1 above, and any other changes which are necessary
in order to prevent the Warrant exchange from changing the respective
rights and obligations of the Company and the Holder as they existed
immediately prior to such exchange.
4.4 Loss or Mutilation. Upon receipt by the Company of evidence
satisfactory to it of the ownership of, and the loss, theft,
destruction or mutilation of, this Warrant and (in the case of loss,
theft, or destruction) of indemnity satisfactory to it, and (in the
case of mutilation) upon surrender and cancellation hereof, the
Company will execute and deliver in lieu hereof a new Warrant.
ARTICLE V
HOLDER RIGHTS
5.1 No Shareholder Rights Until Exercise. No Holder hereof, solely by
virtue hereof, shall be entitled to any rights as a shareholder of the
Company. Holder shall have all rights of a shareholder with respect
to securities purchased upon exercise hereof at the time of cash or
deemed exercise pursuant to Sections 2.1 and 2.2 hereof.
5.2 Registration Rights. The Company agrees that any shares of Common
Stock issued to Holder upon exercise of this Warrant shall be subject
to the registration rights set forth in the Registration Rights
Agreement of even date herewith among the Company, the Purchaser and
others.
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ARTICLE VI
MISCELLANEOUS
6.1 Additional Covenants by the Company. The Company further covenants
and agrees that it will:
a. Give each Holder prompt written notice of any
intended changes to the composition of its capital
structure, whether by issuance of new securities or
otherwise;
b. Give each Holder written notice of any shareholders'
meeting and will allow a representative of each
Holder to attend such meetings;
c. Give each Holder at least five days' prior written
notice of any action that the Company intends to take
by shareholders' written consent;
d. Allow, upon reasonable notice and at reasonable
times, the inspection of its minute book and other
corporate records by a representative of the Holder;
and
e. Not engage, other than on arm's length terms, in any
transaction with any of its shareholders or
affiliates (as such term is defined under Rule 144
issued by the Securities and Exchange Commission
under the 1933 Securities Act, as amended).
6.2 Governmental Approvals. The Company will from time to time take all
action which may be necessary to obtain and keep effective any and all
permits, consents and approvals of governmental agencies and
authorities and securities acts filings under federal and state laws,
which may be or become requisite in connection with the issuance,
sale, and delivery of this Warrant, and the issuance. sale and
delivery of the shares of Common Stock or other securities or property
issuable or deliverable upon exercise of this Warrant.
6.1 Governing Laws. It is the intention of the parties hereto that except
as set forth below, the internal laws of the State of Connecticut,
U.S.A. (irrespective of its choice of law principles) shall govern the
validity of this warrant, the construction of its terms. and the
interpretation and enforcement of the rights and duties of the parties
hereto, provided that the corporation laws of the State of Delaware
shall govern the procedural and substantive matters pertaining to the
due authorization, issuance, delivery and exercise of this Warrant and
the shares of Common Stock upon exercise hereof. Except as set forth
below, the parties hereby agree that any suit to enforce any provision
of this Warrant
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arising out of or based upon this Warrant or the business relationship
between any of the parties hereto shall be brought in the United
States District Court for the District of Delaware or the courts of
the State of Delaware located in Wilmington, Delaware. Each party
hereby agrees that such courts shall have personal jurisdiction and
venue with respect to such party, and each party hereby submits to the
personal jurisdiction and venue of such courts. In addition to the
foregoing jurisdiction, Holder at its sole option, may commence any
such suit in any jurisdiction in which the Company has a business
office or is incorporated.
6.4 Binding Upon Successors and Assigns. Subject to, and unless otherwise
provided in, this Warrant, each and all of the covenants, terms
provisions, and agreements contained herein shall be binding upon, and
inure to the benefit of the permitted successors. executors, heirs,
representatives, administrators and assigns of the parties hereto.
6.5 Severability. If any one or more provisions of this Warrant, or the
application thereof, shall for any reason and to any extent be invalid
or unenforceable, the remainder of this Warrant and the application of
such provisions to other persons or circumstances shall be interpreted
so as best to reasonably effect the intent of the parties hereto. The
parties further agree to replace any such void or unenforceable
provisions of this Warrant with valid and enforceable provisions which
will achieve, to the extent possible, the economic, business and other
purposes of the void or unenforceable provisions.
6.6 Default, Amendment and Waivers. This Warrant may be amended upon the
written consent of the Company and the Holder. The waiver by a party
of any breach hereof for default in payment of any amount due
hereunder or default in the performance hereof shall not be deemed to
constitute a waiver of any other default or any succeeding breach or
default. It shall be an event of default under this Warrant if the
Company breaches any term or condition hereof or fails to perform any
obligation as and when required hereunder and such breach or failure
is not cured within thirty (30) days after receiving written notice
thereof from Holder. Upon such event of default, the Warrant Price for
all shares shall be reduced by one-fifth and thereafter shall continue
to be reduced by one-fifth from the then adjusted Warrant Price for
each successive thirty (30) day period in which such breach is not
cured.
6.7 No Waiver. The failure of any party to enforce any of the provisions
hereof shall not be construed to be a waiver of the right of such
party thereafter to enforce such provisions.
6.8 Attorneys' Fees. Should suit be brought to enforce or interpret any
part of this Warrant, the prevailing party shall be entitled to
recover, as an element of the costs of suit and not as damages,
reasonable attorneys fees to be fixed by the court (including without
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limitation, costs, expenses and fees on any appeal). The prevailing
party shall be the party entitle to recover its costs of suit,
regardless of whether such suit proceeds to final judgment. A party
not entitled to recover its costs shall not be entitled to recover
attorneys' fees. No sum for attorneys' fees shall be counted in
calculating the amount of a judgment for purposes of determining if a
party is entitled to recover costs or attorneys' fees.
6.9 Notices. Whenever any party hereto desires or is required to give any
notices, demand, or request with respect to this Warrant, each such
communication shall be in writing and shall be effective only if it
is delivered by personal service or delivered by a nationally
recognized overnight courier, in each case addressed to the parties
hereto at their respective addresses set forth at the beginning of
this Agreement. Such communication shall be effective when they are
received by the addressee thereof. Any party may change its address
for such communications by giving notice thereof to the other party
in conformity with this Section.
6.10 Time. Time is of the essence of this Warrant.
6.11 Construction of Agreement. This Warrant has been negotiated by the
respective parties hereto and their attorneys and the language hereof
shall not be construed for or against any party.
6.12 No Endorsement. Holder understands that no federal or state
securities administrator has made any finding or determination
relating to the fairness of investment in the Company or purchase of
the Common Stock hereunder and that no federal or state securities
administrator has recommended or endorsed the offering of securities
by the Company hereunder.
6.13 Pronouns. All pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person, persons, entity or entities may require.
6.14 Further Assurances. Each party agrees to cooperate fully with the
other parties and to execute such further instruments, documents and
agreements and to give such further written assurances, as may be
reasonably requested by any other party to better evidence and reflect
the transactions described herein and contemplated hereby, and to
carry into effect the intents and purposes of this Warrant.
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IN WITNESS WHEREOF, the undersigned Company has caused this Common
Stock Warrant to be executed and delivered on the date first above written by
its President, thereunto duly authorized.
COMPANY:
Centrum Industries, Inc.
By: /s/ George H. Wells
-----------------------------------
George Wells
Its President
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EXHIBIT 10.5
COMMON STOCK WARRANT
March 8, 1996
NEITHER THIS WARRANT, NOR THE STOCK TO BE ISSUED UPON EXERCISE
HEREOF, HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"1933 SECURITIES ACT"), OR QUALIFIED OR REGISTERED UNDER ANY STATE SECURITIES
LAWS (THE "STATE SECURITIES LAWS"), AND THIS WARRANT HAS BEEN, AND THE COMMON
STOCK TO BE ISSUED UPON EXERCISE HEREOF WILL BE, ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF.
NO SUCH SALE OR OTHER DISPOSITION MAY BE MADE WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE 1933 SECURITIES ACT AND COMPLIANCE WITH THE APPLICABLE
STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE
ISSUER AND ITS COUNSEL, THAT SAID REGISTRATION IS NOT REQUIRED UNDER THE 1933
SECURITIES ACT AND THAT APPLICABLE STATE SECURITIES LAWS HAVE BEEN COMPLIED
WITH.
WARRANT
Void after March 8, 2004
No. 1 Warrant to Purchase Common Stock
$.05 Par Value
This certifies that FIRST NEW ENGLAND CAPITAL LIMITED PARTNERSHIP
("Purchaser"), having an address of 100 Pearl Street, Hartford,
Connecticut 06103, or any party to whom this Warrant is assigned in compliance
with the terms hereof (Purchaser and any such assignee being hereafter
sometimes referred to as "Holder"), is entitled to subscribe to and purchase,
(i) during the period commencing at the date first set forth above and ending
at 5 p.m. Toledo, Ohio local time, on the "Expiration Date" (as defined below),
THREE HUNDRED SEVENTY-FIVE THOUSAND (375,000) shares of fully paid and
nonassessable Common Stock (as hereinafter defined) of CENTRUM INDUSTRIES, INC.
(the "Company"), a Delaware corporation with its principal place of business at
6135 Trust Drive, Suite 104A, Holland, Ohio 43528. This Warrant is one of a
series of Warrants identical in form issued by the Company pursuant to the
Agreement (as defined below), and the Holder, by acceptance hereof, agrees to
be bound by the provisions of such Agreement as applicable to this Warrant. The
purchase price of each such share of Common Stock shall be the Warrant Price as
defined below. This Warrant was originally issued to Purchaser pursuant to the
Agreement (as defined below).
ARTICLE I
DEFINITIONS
1.1 "Aggregate Price" shall mean the product, at any time of reference, of
(i) the Warrant Price multiplied by (ii) the number of shares of Warrant
Stock.
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1.2 "Agreement" shall mean that certain Note and Warrant Purchase Agreement
entered into by and between Purchaser, among others, and the Company of
even date herewith.
1.3 "Common Stock" shall mean and include the Company's common stock, par
value $.05, as constituted on the date hereof, and shall also include any
capital stock of any class or series of the Company's hereafter authorized
which shall substitute for or replace the Common Stock as constituted on
the date hereof; provided, however, that in the event the Company
authorizes one or more classes or series of capital stock qualifying as
"Common Stock" for purposes of the foregoing definition, in addition to
the class of authorized capital stock denominated as "Common Stock" in the
Company's Certificate of Incorporation as of the date hereof, the Holder
shall have the right to designate at each time it exercises its rights
hereunder the class or series of authorized capital stock that it elects
to purchase in satisfaction of its rights hereunder.
1.4 "Common Stock Equivalents" shall mean Convertible Securities and Rights.
1.5 "Convertible Securities" means any securities which are directly or
indirectly convertible into Common Stock.
1.6 "Effective Price" means the quotient obtained by dividing (i) Minimum
Consideration by (ii) Maximum Shares Upon Exercise.
1.7 "Expiration Date" means March 8, 2004.
1.8 "Maximum Shares Upon Exercise" means the maximum number of shares of
Common Stock issuable under a Common Stock Equivalent upon complete
exercise and full conversion of all Rights or Convertible Securities
represented thereby, computed without regard to contingent adjustments to
the number of shares issuable upon exercise and conversion.
1.9 "Minimum Consideration" means the minimum aggregate consideration paid or
payable at any time for the purchase of the Common Stock Equivalents
during the term of the Common Stock Equivalents, and upon complete
exercise and full conversion of the Common Stock Equivalents, computed
without regard to contingent adjustments to exercise or conversion price.
1.10 "Notes" means the Company's 11% Convertible Subordinated Notes due March
31, 2001, one or more of which has been issued by the Company on the date
hereof to the Purchaser, among others, together with any note issued in
exchange therefor or replacement thereof.
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1.11 "Rights" means any options, warrants, or rights to purchase Common Stock
or Convertible Securities.
1.12 "Warrant Price" shall mean Two and 00/100 ($2.00) Dollars for each share
of Common Stock subject, however, to reduction pursuant to Section 3.5
hereof.
1.13 "Warrant Stock" shall mean 375,000 shares of Common Stock, subject to
reduction as provided in Section 2.2 hereof.
ARTICLE II
EXERCISE AND PAYMENT
2.1 Cash Exercise. The purchase rights represented by this Warrant may be
exercised by Holder, in whole or in part, by written notice of exercise
delivered to the Company at least twenty (20) days prior to the intended
date of exercise and by the surrender of this Warrant at the principal
office of the Company, and by the payment to the Company, by certified,
cashier's or other check acceptable to the Company, of an amount equal to
the aggregate Warrant Price of the shares being purchased.
2.2 Deemed Exercise Upon Conversion of Notes. In lieu of exercising this
Warrant pursuant to Section 2.1, Holder may elect to convert all or a
portion of the outstanding principal balance of any of the Notes into
shares of Common Stock at a conversion price equal to the Warrant Price
pursuant to the terms of such Note, in which event this Warrant shall be
deemed, without further act or instrument, to have been exercised for a
number of shares of Common Stock equal to the number of shares of Common
Stock received by the Purchaser upon such conversion, and the number of
shares of Warrant Stock subject to this Warrant shall be reduced by an
equal number of shares, and this Warrant shall remain in full force and
effect with respect to such reduced number of shares of Warrant Stock. The
foregoing conversion shall be effected by delivery of a written notice to
the Company at least twenty (20) days prior to the intended date of
conversion specifying the amount of outstanding principal to be converted.
By way of example and illustration only, if the Purchaser elects to
convert $100,000 of the outstanding principal balance of a Note and
receives 50,000 shares of Common Stock upon such conversion, the number of
shares of Warrant Stock subject to this Warrant shall be reduced from
375,000 to 325,000 and this Warrant shall remain in full force and effect
with respect to such 325,000 shares of Warrant Stock.
2.3 Stock Certificate. In the event of any exercise of the rights
represented by this Warrant, certificates for the shares of Common Stock
so purchased shall be delivered to Holder within a reasonable time and,
unless this Warrant has been fully exercised or has
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expired, a new Warrant representing the number of shares of Common Stock
with respect to which this Warrant shall not have been exercised shall also
be issued to Holder within such time.
2.4 Stock Fully Paid; Reservation of Shares. The Company covenants and
agrees that all Common Stock which may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be fully paid and
nonassessable and free from all taxes, liens and charges with respect to
the issue thereof (excluding taxes based on the income of Holder),
provided that any such shares of Common Stock shall be subject to the
restrictions, obligations and duties imposed upon stockholders of the
Company pursuant to that certain Equity Holders' Agreement, of even date
herewith, among the Company and the Purchaser, among others, as the same
may be amended and supplemented to and including the date hereof (the
"Equity Holders' Agreement"), and shall be subject to applicable
restrictions imposed by relevant federal and state securities laws
relating to capital stock sold in a private placement. The Company further
covenants and agrees that during the period within which the rights
represented by this Warrant may be exercised, the Company will at all
times have authorized and reserved for issuance a sufficient number of
shares of its Common Stock as would be required upon the full exercise of
the rights represented by this Warrant.
2.5 Fractional Shares. No fractional share of Common Stock will be issued in
connection with any exercise hereof, but in lieu of a fractional share
upon complete exercise hereof, Holder may, purchase a whole share at the
then effective Warrant Price.
ARTICLE III
CERTAIN ADJUSTMENTS OF NUMBER OF
SHARES PURCHASABLE AND WARRANT PRICE
The number and kind of securities purchasable upon the exercise of this
Warrant and the Warrant Price shall be subject to adjustment from time to time
upon the occurrence of certain events, as follows:
3.1 Reclassification, Consolidation or Merger. ln case of: (i) any
reclassification or change of outstanding securities issuable upon
exercise of this Warrant; (ii) any consolidation or merger of the Company
with or into another corporation (other than a merger with another
corporation in which the Company is a continuing corporation and which
does not result in any reclassification, change or exchange of outstanding
securities issuable upon exercise of this Warrant); or (iii) any sale or
transfer to another corporation of all, or substantially all, of the
property of the Company, then, and in each such event, the Company or such
successor or purchasing corporation, as the case may be, shall execute
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a new Warrant which will provide that Holder shall have the right to
exercise such new Warrant and purchase upon such exercise, in lieu of each
share of Common Stock theretofore issuable upon exercise of this Warrant,
the kind and amount of securities, money and property receivable upon such
reclassification, change, consolidation, merger, sale or transfer by a
holder of one share of Common Stock issuable upon exercise of this Warrant
had this Warrant been exercised immediately prior to such
reclassification, change, consolidation, merger, sale or transfer. Such
new Warrant shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided in this
Section 3 and the provisions of this Section 3.1, shall similarly apply to
successive reclassifications, changes, consolidations, mergers, sales and
transfers.
3.2 Subdivision or Combination of Shares. If the Company shall at any time
while this Warrant remains outstanding and unexercised in whole or in
part: (i) divide its Common Stock, the Warrant Price shall be
proportionately reduced; or (ii) combine shares of is Common Stock, the
Warrant Price shall be proportionately increased.
3.3 Adjustment for Issue or Sale of Shares at Less Than the Warrant Price.
If, in a transaction other than an issuance excepted from these provisions
as set forth below or an issuance that causes an adjustment under Sections
3.1 or 3.2, the Company shall at any time or from time to time, issue any
additional shares of Common Stock without consideration or for a net
consideration per share less than the Warrant Price in effect immediately
prior to such issuance, then, and in each case, the Warrant Price shall be
lowered to an amount equal to the lowest per share price received, or
deemed received, by the Company as consideration for such Shares.
For purposes of this Section 3.3:
(i) There shall be no adjustment under this Section 3.3
for any sales or issuances: (a) in a transaction in which an
adjustment will be made pursuant to Section 3.1 or 3.2; or
(b) upon exercise or conversion of Common Stock Equivalents
outstanding on the original date of issuance of this Warrant;
or (c) pursuant to that certain Confidential Private
Placement Memorandum of the Company dated November 15, 1995
for the sale of up so 2,400,000 shares of the Company's
common stock at a price of $1.50 per share; or (d) upon the
Company's granting to George Wells, no later than ninety (90)
days after March 31, 1996 at the discretion of the Company's
Board of Directors, based upon satisfaction of certain
incentive goals, an option or options to purchase up to
150,000 shares of the Company's common stock at a price of
$1.50 per share;
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(ii) The issuance of Common Stock Equivalents shall be
deemed an issuance at such time of the shares of Common
Stock underlying the Common Stock Equivalents. If the
Effective Price shall be less than the Warrant Price at the
time of such issuance, then an adjustment in the Warrant
Price shall be made upon each such issuance in the manner
provided in this Section 3.3. No adjustment of the Warrant
Price shall be made under this Section 3.3 upon the issuance
of shares of Common Stock upon the exercise or conversion of
Common Stock Equivalents if an adjustment has previously been
made as above provided. Any adjustment of the Warrant Price
shall be disregarded, if, as and when such Common Stock
Equivalents expire or are cancelled without being exercised
so that the Warrant Price effective immediately upon such
cancellation or expiration shall be equal to the Warrant
Price in effect at the time of the issuance of the expired or
cancelled Common Stock Equivalents, with such additional
adjustments as would have been made to the Warrant Price had
the expired or cancelled Common Stock Equivalents not been
issued.
3.4 Other Action Affecting Common Stock. (a) If the Company takes any action
affecting its Common Stock after the date hereof (including dividends and
distributions), other than an action described in any of Sections 3.1 and
3.2 hereof, which would have a material adverse effect upon Holder's
rights hereunder, the Warrant Price shall be adjusted downward in such
manner and at such time as the Board of Directors of the Company shall in
good faith determine to be equitable under the circumstances.
(b) In case the Company shall make any distribution of its assets to
holders of its Common Stock as a liquidation or partial liquidation
dividend or by way of return of capital, or other than as a dividend
payable out of earnings or surplus legally available for dividends under
the laws of the state of incorporation of the Company, and Holder
exercises this Warrant within thirty (30) days after the later of (i) the
record date for the determination of the holders of Common Stock entitled
to such distribution of assets and (ii) the date upon which notice of
such distribution is delivered by the Company to Holder, Holder shall be
entitled to receive, for no additional consideration, in addition to the
Warrant Stock, the amount of such assets (or, at the option of the
Company, a sum equal to the value thereof at the time of such
distribution, such value to be determined by the Board of Directors of
the Company in good faith) that would have been payable to the Holder had
it been the holder of record of the Warrant Stock on such record date.
(c) In case the Company shall liquidate or wind up its affairs, the
Holder shall be entitled, upon the exercise hereof, to receive, in lieu
of the shares of Warrant Stock that the Holder would have been entitled
to receive, the same kind and amount of assets as would have been issued,
paid or otherwise distributed to the Holder upon such
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dissolution, liquidation or winding up with respect to such shares of
Warrant Stock, had the Holder been the holder of record of such shares of
Warrant Stock on the record date for the determination of those entitled
to receive any such distribution; provided, however, that all
rights under this Warrant shall terminate on a date fixed by the Company,
such date to be not earlier than the date of commencement of proceedings
for dissolution, liquidation or winding up and not later than thirty (30)
days after such date of commencement, unless the Holder shall have, prior
to such termination date, exercised this Warrant. Written notice of such
termination of rights under this Warrant shall be given to the Holder at
least thirty (30) days prior to such termination date.
3.5 Adjustment with Respect to Common Stock Offering. The Company shall
complete an offering of its common stock within the period ending February
28, 1997. If such offering shall result in the Company's receipt by such
date of aggregate proceeds (after deduction of offering expenses) in an
amount less than $1,800,000, then, effective March 1, 1997, the Warrant
Price per share shall be reduced by an amount equal to the product of (i)
$0.50, multiplied by the difference between (A) 1 and (B) the decimal
equivalent of a fraction, the numerator of which is the amount of
aggregate proceeds (net of offering expenses) received by the Company by
February 28, 1997, and the denominator of which is $1,800,000. The Warrant
Price shall not be adjusted pursuant to this Section 3.5 if the aggregate
proceeds (after deduction of offering expenses) received by the Company by
such date as a result of such offering exceeds $1,800,000.
3.6 Time of Adjustments to the Warrant Price. All adjustments to the Warrant
Price and the number of shares purchasable hereunder, unless otherwise
specified herein, shall be effective as of the earlier of:
(i) the date of issue (or date of sale, if earlier)
of the security causing the adjustment;
(ii) the effective date of a division or combination
of shares;
(iii) the record date of any action of holders of the
Company's capital stock of any class taken for the purpose of
dividing or combining shares or entitling shareholders to
receive a distribution or dividends.
3.7 Notice of Adjustments. In each case of an adjustment in the Warrant
Price and the number of shares purchasable hereunder, the Company, at its
expense, shall cause the Treasurer or chief financial officer of the
Company to compute such adjustment and prepare a certificate setting forth
such adjustment and showing in detail the facts upon which such adjustment
is based. The Company shall promptly mail a copy of each such certificate
to Holder pursuant to Section 6.9 hereof.
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3.8 Duration of Adjusted Warrant Price. Following each adjustment of the
Warrant Price, such adjusted Warrant Price shall remain in effect until a
further adjustment of the Warrant Price.
3.9 Adjustment of Number of Shares. Upon each adjustment of the Warrant
Price pursuant to this Section 3, the number of shares of Warrant Stock
shall be adjusted to the nearest whole share, to the number obtained by
dividing the Aggregate Price by the Warrant Price as adjusted.
ARTICLE IV
TRANSFER, EXCHANGE AND LOSS
4.1 Transfer. This Warrant is transferable on the books of the Company at
its principal office by the registered Holder hereof upon surrender of
this Warrant properly endorsed, subject to compliance with federal and
state securities laws. The Company shall issue and deliver to the
transferee a new Warrant or Warrants representing the Warrants so
transferred. Upon any partial transfer, the Company will issue and deliver
to Holder a new Warrant or Warrants with respect to the Warrants not so
transferred. Notwithstanding the foregoing, Holder shall not be entitled
to transfer a number of shares or an interest in this Warrant representing
less than five percent (5%) of the aggregate shares initially covered by
this Warrant. Any transferee shall be subject to the same restrictions on
transfer with respect to this Warrant as the Purchaser.
4.2 Securities Laws. Upon any issuance of shares of Common Stock upon
exercise of this Warrant, it shall be the Company's responsibility to
comply with the requirements of: (1) the 1933 Securities Act; (2) the
Securities Exchange Act of 1934, as amended; (3) any applicable listing
requirements of any national securities exchange; (4) any state
securities regulation or "Blue Sky" laws; and (5) requirements under any
other law or regulation applicable to the issuance or transfer of such
shares. If required by the Company, in connection with each issuance of
shares of Common Stock upon exercise of this Warrant, the Holder will
give: (i) assurances in writing, satisfactory to the Company, that such
shares are not being purchased with a view to the distribution thereof in
violation of applicable laws, (ii) sufficient information, in writing, to
enable the Company to rely on exemptions from the registration or
qualification requirements of applicable laws, if available, with respect
to such exercise, (iii) the legal opinion required by the restrictive
legend set forth at the beginning of this Warrant, and (iv) its
cooperation to the Company in connection with such compliance.
4.3 Exchange. Subject to compliance with applicable federal and state
securities laws, this Warrant is exchangeable at the principal office of
the Company for Warrants to purchase
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the same number of shares of Common Stock purchasable hereunder, each new
Warrant to represent the right to purchase such number of shares of
Common Stock as Holder shall designate at the time of such exchange.
Each new Warrant shall be identical in form and content to this Warrant,
except for appropriate changes in the number of shares of Common Stock
covered thereby, the aggregate purchase price of such shares, the
percentage stated in Section 4.1 above, and any other changes which are
necessary in order to prevent the Warrant exchange from changing the
respective rights and obligations of the Company and the Holder as they
existed immediately prior to such exchange.
4.4 Loss or Mutilation. Upon receipt by the Company of evidence satisfactory
to it of the ownership of, and the loss, theft, destruction or mutilation
of, this Warrant and (in the case of loss, theft, or destruction) of
indemnity satisfactory to it, and (in the case of mutilation) upon
surrender and cancellation hereof, the Company will execute and deliver in
lieu hereof a new Warrant.
ARTICLE V
HOLDER RIGHTS
5.1 No Shareholder Rights Until Exercise. No Holder hereof, solely by virtue
hereof, shall be entitled to any rights as a shareholder of the Company.
Holder shall have all rights of a shareholder with respect to securities
purchased upon exercise hereof at the time of cash or deemed exercise
pursuant to Sections 2.1 and 2.2 hereof.
5.2 Registration Rights. The Company agrees that any shares of Common Stock
issued to Holder upon exercise of this Warrant shall be subject to the
registration rights set forth in the Registration Rights Agreement of even
date herewith among the Company, the Purchaser and others.
ARTICLE VI
MISCELLANEOUS
6.1 Additional Covenants by the Company. The Company further covenants and
agrees that it will:
a. Give each Holder prompt written notice of any
intended changes to the composition of its capital
structure, whether by issuance of new securities or
otherwise;
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b. Give each Holder written notice of any shareholders'
meeting and will allow a representative of each Holder to
attend such meetings;
c. Give each Holder at least five days' prior written
notice of any action that the Company intends to take by
shareholders' written consent;
d. Allow, upon reasonable notice and at reasonable
times, the inspection of its minute book and other corporate
records by a representative of the Holder; and
e. Not engage, other than on arm's length terms, in any
transaction with any of its shareholders or affiliates (as
such term is defined under Rule 144 issued by the Securities
and Exchange Commission under the 1933 Securities Act, as
amended).
6.2 Governmental Approvals. The Company will from time to time take all
action which may be necessary to obtain and keep effective any and all
permits, consents and approvals of governmental agencies and authorities
and securities acts filings under federal and state laws, which may be or
become requisite in connection with the issuance, sale, and delivery of
this Warrant, and the issuance, sale and delivery of the shares of Common
Stock or other securities or property issuable or deliverable upon
exercise of this Warrant.
6.3 Governing Laws. It is the intention of the parties hereto that except as
set forth below, the internal laws of the State of Connecticut, U.S.A.
(irrespective of its choice of law principles) shall govern the validity
of this warrant, the construction of its terms, and the interpretation and
enforcement of the rights and duties of the parties hereto' provided that
the corporation laws of the State of Delaware shall govern the procedural
and substantive matters pertaining to the due authorization, issuance,
delivery and exercise of this Warrant and the shares of Common Stock upon
exercise hereof. Except as set forth below, the parties hereby agree that
any suit to enforce any provision of this Warrant arising out of or based
upon this Warrant or the business relationship between any of the parties
hereto shall be brought in the United States District Court for the
District of Delaware or the courts of the State of Delaware located in
Wilmington, Delaware. Each party hereby agrees that such courts shall have
personal jurisdiction and venue with respect to such party, and each party
hereby submits to the personal jurisdiction and venue of such courts. In
addition to the foregoing jurisdiction, Holder at its sole option, may
commence any such suit in any jurisdiction in which the Company has a
business office or is incorporated.
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6.4 Binding Upon Successors and Assigns. Subject to, and unless otherwise
provided in, this Warrant, each and all of the covenants, terms,
provisions, and agreements contained herein shall be binding upon, and
inure to the benefit of the permitted successors, executors, heirs,
representatives, administrators and assigns of the parties hereto.
6.5 Severability. If any one or more provisions of this Warrant, or the
application thereof, shall for any reason and to any extent be invalid or
unenforceable, the remainder of this Warrant and the application of such
provisions to other persons or circumstances shall be interpreted so as
best to reasonably effect the intent of the parties hereto. The parties
further agree to replace any such void or unenforceable provisions of this
Warrant with valid and enforceable provisions which will achieve, to the
extent possible, the economic, business and other purposes of the void or
unenforceable provisions.
6.6 Default, Amendment and Waivers. This Warrant may be amended upon the
written consent of the Company and the Holder. The waiver by a party of
any breach hereof for default in payment of any amount due hereunder or
default in the performance hereof shall not be deemed to constitute a
waiver of any other default or any succeeding breach or default. It shall
be an event of default under this Warrant if the Company breaches any term
or condition hereof or fails to perform any obligation as and when
required hereunder and such breach or failure is not cured within thirty
(30) days after receiving written notice thereof from Holder. Upon such
event of default, the Warrant Price for all shares shall be reduced by
one-fifth and thereafter shall continue to be reduced by one-fifth from
the then adjusted Warrant Price for each successive thirty (30) day period
in which such breach is not cured.
6.7 No Waiver. The failure of any party to enforce any of the provisions
hereof shall not be construed to be a waiver of the right of such party
thereafter to enforce such provisions .
6.8 Attorneys' Fees. Should suit be brought to enforce or interpret any part
of this Warrant, the prevailing party shall be entitled to recover, as an
element of the costs of suit and not as damages, reasonable attorneys fees
to be fixed by the court (including without limitation, costs, expenses
and fees on any appeal). The prevailing party shall be the party entitled
to recover its costs of suit, regardless of whether such suit proceeds to
final judgment. A party not entitled to recover its costs shall not be
entitled to recover attorneys' fees. No sum for attorneys' fees shall be
counted in calculating the amount of a judgment for purposes of
determining if a party is entitled to recover costs or attorneys' fees.
6.9 Notices. Whenever any party hereto desires or is required to give any
notices. demand, or request with respect to this Warrant, each such
communication shall be in writing and
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shall be effective only if it is delivered by personal service or
delivered by a nationally recognized overnight courier, in each case
addressed to the parties hereto at their respective addresses set forth
at the beginning of this Agreement. Such communication shall be effective
when they are received by the addressee thereof. Any party may change its
address for such communications by giving notice thereof to the other
party in conformity with this Section.
6.10 Time. Time is of the essence of this Warrant.
6.11 Construction of Agreement. This Warrant has been negotiated by the
respective parties hereto and their attorneys and the language hereof
shall not be construed for or against any party.
6.12 No Endorsement. Holder understands that no federal or state securities
administrator has made any finding or determination relating to the
fairness of investment in the Company or purchase of the Common Stock
hereunder and that no federal or state securities administrator has
recommended or endorsed the offering of securities by the Company
hereunder.
6.13 Pronouns. All pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person, persons, entity or entities may require.
6.14 Further Assurances. Each party agrees to cooperate fully with the other
parties and to execute such further instruments, documents and agreements
and to give such further written assurances, as may be reasonably
requested by any other party to better evidence and reflect the
transactions described herein and contemplated hereby, and to carry into
effect the intents and purposes of this Warrant.
IN WITNESS WHEREOF, the undersigned Company has caused this Common Stock
Warrant to be executed and delivered on the date first above written by its
President, thereunto duly authorized.
COMPANY:
Centrum Industries, Inc.
By: /s/ George H. Wells
------------------------------------
George H. Wells
Its President
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EXHIBIT 10.6
COMMON STOCK WARRANT
March 8, 1996
NEITHER THIS WARRANT, NOR THE STOCK TO BE ISSUED UPON EXERCISE HEREOF, HAS BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 SECURITIES
ACT"), OR QUALIFIED OR REGISTERED UNDER ANY STATE SECURITIES LAWS (THE "STATE
SECURITIES LAWS"), AND THIS WARRANT HAS BEEN, AND THE COMMON STOCK TO BE ISSUED
UPON EXERCISE HEREOF WILL BE, ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO,
OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF. NO SUCH SALE OR
OTHER DISPOSITION MAY BE MADE WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE 1933 SECURITIES ACT AND COMPLIANCE WITH THE APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE ISSUER AND ITS
COUNSEL, THAT SAID REGISTRATION IS NOT REQUIRED UNDER THE 1933 SECURITIES ACT
AND THAT APPLICABLE STATE SECURITIES LAWS HAVE BEEN COMPLIED WITH.
WARRANT
Void after March 8, 2004
No. 3 Warrant to Purchase Common Stock
$.05 Par Value
This certifies that North Dakota Small Business Investment Company, a North
Dakota Limited Partnership ("Purchaser"), having an address of c/o
InvestAmerica ND Management, Inc., 101 2nd Street S.E., Suite 800, Cedar
Rapids, Iowa 52401, or any party to whom this Warrant is assigned in compliance
with the terms hereof (Purchaser and any such assignee being hereafter
sometimes referred to as "Holder"), is entitled to subscribe to and purchase,
(i) during the period commencing at the date first set forth above and ending
at 5 p.m. Toledo, Ohio local time, on the "Expiration Date" (as defined below),
TWO HUNDRED FORTY-SEVEN THOUSAND FIVE HUNDRED FIFTY-FIVE (247,555) shares of
fully paid and nonassessable Common Stock (as hereinafter defined) of Centrum
Industries, inc. (the "Company"'), a Delaware corporation with its principal
place of business at 6135 Trust Drive, Suite 104A, Holland, Ohio 43528. This
Warrant is one of a series of Warrants identical in form issued by the Company
pursuant to the Agreement (as defined below), and the Holder, by acceptance
hereof, agrees to be bound by the provisions of such Agreement as applicable to
this Warrant. The purchase price of each such share of Common Stock shall be
the Warrant Price as defined below. This Warrant was originally issued to
Purchaser pursuant to the Agreement (as defined below).
<PAGE> 2
ARTICLE I
DEFINITIONS
1.1 "Aggregate Price" shall mean the product, at any time of reference, of (i)
the Warrant Price multiplied by (ii) the number of shares of Warrant
Stock.
1.2 "Agreement" shall mean that certain Note and Warrant Purchase Agreement
entered into by and between Purchaser, among others, and the Company of
even date herewith.
1.3 "Common Stock" shall mean and include the Company's common stock, par
value $.05, as constituted on the date hereof, and shall also include any
capital stock of any class or series of the Company's hereafter authorized
which shall substitute for or replace the Common Stock as constituted on
the date hereof; provided, however, that in the event the Company
authorizes one or more classes or series of capital stock qualifying as
"Common Stock" for purposes of the foregoing definition, in addition to
the class of authorized capital stock denominated as "Common Stock" in the
Company's Certificate of Incorporation as of the date hereof, the Holder
shall have the right to designate at each time it exercises its rights
hereunder the class or series of authorized capital stock that it elects
to purchase in satisfaction of its rights hereunder.
1.4 "Common Stock Equivalents" shall mean Convertible Securities and Rights.
1.5 "Convertible Securities" means any securities which are directly or
indirectly convertible into Common Stock.
1.6 "Effective Price" means the quotient obtained by dividing (i) Minimum
Consideration by (ii) Maximum Shares Upon Exercise
1.7 "Expiration Date" means March 8, 2004.
1.8 "Maximum Shares Upon Exercise" means the maximum number of shares of
Common Stock issuable under a Common Stock Equivalent upon complete
exercise and full conversion of all Rights or Convertible Securities
represented thereby, computed without regard to contingent adjustments to
the number of shares issuable upon exercise and conversion.
1.9 "Minimum Consideration" means the minimum aggregate consideration paid or
payable at any time for the purchase of the Common Stock Equivalents
during the term of the Common Stock Equivalents, and upon complete
exercise and full conversion of the Common Stock Equivalents, computed
without regard to contingent adjustments to exercise or conversion price.
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1.10 "Notes" means the Company's 11% Convertible Subordinated Notes due March
31, 2001, one or more of which has been issued by the Company on the date
hereof to the Purchaser, among others, together with any note issued in
exchange therefor or replacement thereof.
1.11 "Rights" means any options, warrants, or rights to purchase Common Stock
or Convertible Securities.
1.12 "Warrant Price" shall mean Two and 00/100 ($2.00) Dollars for each share
of Common Stock subject, however, to reduction pursuant to Section 3.5
hereof.
1.13 "Warrant Stock" shall mean 247,555 shares of Common Stock, subject to
reduction as provided in Section 2.2 hereof.
ARTICLE II
EXERCISE AND PAYMENT
2.1 Cash Exercise. The purchase rights represented by this Warrant may be
exercised by Holder, in whole or in part, by written notice of exercise
delivered to the Company at least twenty (20) days prior to the intended
date of exercise and by the surrender of this Warrant at the principal
office of the Company, and by the payment to the Company, by certified,
cashier's or other check acceptable to the Company, of an amount equal to
the aggregate Warrant Price of the shares being purchased.
2.2 Deemed Exercise Upon Conversion of Notes. In lieu of exercising this
Warrant pursuant to Section 2.1, Holder may elect to convert all or a
portion of the outstanding principal balance of any of the Notes into
shares of Common Stock at a conversion price equal to the Warrant Price
pursuant to the terms of such Note, in which event this Warrant shall be
deemed, without further act or instrument, to have been exercised for a
number of shares of Common Stock equal to the number of shares of Common
Stock received by the Purchaser upon such conversion, and the number of
shares of Warrant Stock subject to this Warrant shall be reduced by an
equal number of shares, and this Warrant shall remain in full force and
effect with respect to such reduced number of shares of Warrant Stock. The
foregoing conversion shall be effected by delivery of a written notice to
the Company at least twenty (20) days prior to the intended date of
conversion specifying the amount of outstanding principal to be converted.
By way of example and illustration only, if the Purchaser elects to
convert $100,000 of the outstanding principal balance of a Note and
receives 50,000 shares of Common Stock upon such conversion, the number of
shares of Warrant Stock subject to this Warrant shall be reduced from
247,555 to 197,555 and this Warrant shall remain in full force and effect
with respect to such 197,555 shares of Warrant Stock.
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2.3 Stock Certificate. In the event of any exercise of the rights represented
by this Warrant, certificates for the shares of Common Stock so purchased
shall be delivered to Holder within a reasonable time and, unless this
Warrant has been fully exercised or has expired, a new Warrant
representing the number of shares of Common Stock with respect to which
this Warrant shall not have been exercised shall also be issued to Holder
within such time.
2.4 Stock Fully Paid; Reservation of Shares. The Company covenants and agrees
that all Common Stock which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be fully paid and
nonassessable and free from all taxes, liens and charges with respect to
the issue thereof (excluding taxes based on the income of Holder),
provided that any such shares of Common Stock shall be subject to the
restrictions, obligations and duties imposed upon stockholders of the
Company pursuant to that certain Equity Holders' Agreement, of even date
herewith, among the Company and the Purchaser, among others, as the same
may be amended and supplemented to and including the date hereof (the
"Equity Holders' Agreement"), and shall be subject to applicable
restrictions imposed by relevant federal and state securities laws
relating to capital stock sold in a private placement. The Company further
covenants and agrees that during the period within which the rights
represented by this Warrant may be exercised, the Company will at all
times have authorized and reserved for issuance a sufficient number of
shares of its Common Stock as would be required upon the full exercise of
the rights represented by this Warrant.
2.5 Fractional Shares. No fractional share of Common Stock will be issued in
connection with any exercise hereof, but in lieu of a fractional share
upon complete exercise hereof, Holder may purchase a whole share at the
then effective Warrant Price.
ARTICLE III
CERTAIN ADJUSTMENTS OF NUMBER OF
SHARES PURCHASABLE AND WARRANT PRICE
The number and kind of securities purchasable upon the exercise of this
Warrant and the Warrant Price shall be subject to adjustment from time to time
upon the occurrence of certain events, as follows:
3.1 Reclassification, Consolidation or Merger. In case of: (i) any
reclassification or change of outstanding securities issuable upon
exercise of this Warrant; (ii) any consolidation or merger of the Company
with or into another corporation (other than a merger with another
corporation in which the Company is a continuing corporation and which
does not result in any reclassification, change or exchange of outstanding
securities issuable upon exercise of this Warrant); or (iii) any sale or
transfer to another corporation of all,
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or substantially all, of the property of the Company, then, and in each
such event, the Company or such successor or purchasing corporation, as the
case may be, shall execute a new Warrant which will provide that Holder
shall have the right to exercise such new Warrant and purchase upon such
exercise, in lieu of each share of Common Stock theretofore issuable upon
exercise of this Warrant, the kind and amount of securities, money and
property receivable upon such reclassification, change, consolidation,
merger, sale or transfer by a holder of one share of Common Stock issuable
upon exercise of this Warrant had this Warrant been exercised immediately
prior to such reclassification, change, consolidation, merger, sale or
transfer. Such new Warrant shall provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided in this
Section 3 and the provisions of this Section 3.1, shall similarly apply to
successive reclassifications, changes, consolidations, mergers, sales and
transfers.
3.2 Subdivision or Combination of Shares. If the Company shall at any time
while this Warrant remains outstanding and unexercised in whole or in
part: (i) divide its Common Stock, the Warrant Price shall be
proportionately reduced; or (ii) combine shares of is Common Stock, the
Warrant Price shall be proportionately increased.
3.3 Adjustment for Issue or Sale of Shares at Less Than the Warrant Price.
If, in a transaction other than an issuance excepted from these provisions
as set forth below or an issuance that causes an adjustment under Sections
3.1 or 3.2, the Company shall at any time or from time to time, issue any
additional shares of Common Stock without consideration or for a net
consideration per share less than the Warrant Price in effect immediately
prior to such issuance, then, and in each case, the Warrant Price shall be
lowered to an amount equal to the lowest per share price received, or
deemed received, by the Company as consideration for such Shares.
For purposes of this Section 3.3:
(i) There shall be no adjustment under this Section 3.3 for any sales
or issuances: (a) in a transaction in which an adjustment will be
made pursuant to Section 3.1 or 3.2; or (b) upon exercise or
conversion of Common Stock Equivalents outstanding on the
original date of issuance of this Warrant; or (c) pursuant to
that certain Confidential Private Placement Memorandum of the
Company dated November 15, 1995 for the sale of up to 2,400,000
shares of the Company's common stock at a price of $1.50 per
share; or (d) upon the Company's granting to George Wells, no
later than ninety (90) days after March 31, 1996 fiscal year at
the discretion of the Company's Board of Directors, based upon
satisfaction of certain incentive goals, an option or options to
purchase up to 150,000 shares of the Company's common stock at a
price of $1.50 per share;
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(ii) The issuance of Common Stock Equivalents shall be deemed an
issuance at such time of the shares of Common Stock underlying
the Common Stock Equivalents. If the Effective Price shall be
less than the Warrant Price at the time of such issuance, then an
adjustment in the Warrant Price shall be made upon each such
issuance in the manner provided in this Section 3.3. No
adjustment of the Warrant Price shall be made under this Section
3.3 upon the issuance of shares of Common Stock upon the exercise
or conversion of Common Stock Equivalents if an adjustment has
previously been made as above provided. Any adjustment of the
Warrant Price shall be disregarded, if, as and when such Common
Stock Equivalents expire or are cancelled without being exercised
so that the Warrant Price effective immediately upon such
cancellation or expiration shall be equal to the Warrant Price in
effect at the time of the issuance of the expired or cancelled
Common Stock Equivalents, with such additional adjustments as
would have been made to the Warrant Price had the expired or
cancelled Common Stock Equivalents not been issued.
3.4 Other Action Affecting Common Stock. (a) If the Company takes any action
affecting its Common Stock after the date hereof (including dividends and
distributions), other than an action described in any of Sections 3.1 and
3.2 hereof, which would have a material adverse effect upon Holder's
rights hereunder, the Warrant Price shall be adjusted downward in such
manner and at such time as the Board of Directors of the Company shall in
good faith determine to be equitable under the circumstances.
(b) In case the Company shall make any distribution of its assets to
holders of its Common Stock as a liquidation or partial liquidation
dividend or by way of return of capital, or other than as a dividend
payable out of earnings or surplus legally available for dividends under
the laws of the state of incorporation of the Company, and Holder exercises
this Warrant within thirty (30) days after the later of (i) the record date
for the determination of the holders of Common Stock entitled to such
distribution of assets and (ii) the date upon which notice of such
distribution is delivered by the Company to Holder, Holder shall be
entitled to receive, for no additional consideration, in addition to the
Warrant Stock, the amount of such assets (or, at the option of the Company,
a sum equal to the value thereof at the time of such distribution, such
value to be determined by the Board of Directors of the Company in good
faith) that would have been payable to the Holder had it been the holder of
record of the Warrant Stock on such record date.
(c) In case the Company shall liquidate or wind up its affairs, the
Holder shall be entitled, upon the exercise hereof, to receive, in lieu of
the shares of Warrant Stock that the Holder would have been entitled to
receive, the same kind and amount of assets as would have been issued, paid
or otherwise distributed to the Holder upon such dissolution, liquidation
or winding up with respect to such shares of Warrant Stock, had
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the Holder been the holder of record of such shares of Warrant Stock on the
record date for the determination of those entitled to receive any such
distribution; provided, however, that all rights under this Warrant shall
terminate on a date fixed by the Company, such date to be not earlier than
the date of commencement of proceedings for dissolution, liquidation or
winding up and not later than thirty (30) days after such date of
commencement, unless the Holder shall have, prior to such termination date,
exercised this Warrant. Written notice of such termination of rights under
this Warrant shall be given to the Holder at least thirty (30) days prior
to such termination date.
3.5 Adjustment with Respect to Common Stock Offering. The Company shall
complete an offering of its common stock within the period ending
February 28, 1997. If such offering shall result in the Company's receipt
by such date of aggregate proceeds (after deduction of offering expenses)
in an amount less than $1,800,000, then, effective March 1, 1997, the
Warrant Price per share shall be reduced by an amount equal to the product
of (i) $0.50, multiplied by the difference between (A) 1 and (B) the
decimal equivalent of a fraction, the numerator of which is the amount of
aggregate proceeds (net of offering expenses) received by the Company by
February 28, 1997, and the denominator of which is $1,800,000. The
Warrant Price shall not be adjusted pursuant to this Section 3.5 if the
aggregate proceeds (after deduction of offering expenses) received by the
Company by such date as a result of such offering exceeds $1,800,000.
3.6 Time of Adjustments to the Warrant Price. All adjustments to the Warrant
Price and the number of shares purchasable hereunder, unless otherwise
specified herein, shall be effective as of the earlier of:
(i) the date of issue (or date of sale, if earlier) of the security
causing the adjustment;
(ii) the effective date of a division or combination of shares;
(iii) the record date of any action of holders of the Company's capital
stock of any class taken for the purpose of dividing or combining
shares or entitling shareholders to receive a distribution or
dividends.
3.7 Notice of Adjustments. In each case of an adjustment in the Warrant Price
and the number of shares purchasable hereunder, the Company. at its
expense, shall cause the Treasurer or chief financial officer of the
Company to compute such adjustment and prepare a certificate setting forth
such adjustment and showing in detail the facts upon which such
adjustment is based. The Company shall promptly mail a copy of each such
certificate to Holder pursuant to Section 6.9 hereof.
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<PAGE> 8
3.8 Duration of Adjusted Warrant Price. Following each adjustment of the
Warrant Price, such adjusted Warrant Price shall remain in effect until a
further adjustment of the Warrant Price.
3.9 Adjustment of Number of Shares. Upon each adjustment of the Warrant Price
pursuant to this Section 3, the number of shares of Warrant Stock shall be
adjusted to the nearest whole share, to the number obtained by dividing
the Aggregate Price by the Warrant Price as adjusted.
ARTICLE IV
TRANSFER, EXCHANGE AND LOSS
4.1 Transfer. This Warrant is transferable on the books of the Company at its
principal office by the registered Holder hereof upon surrender of this
Warrant properly endorsed, subject to compliance with federal and state
securities laws. The Company shall issue and deliver to the transferee a
new Warrant or Warrants representing the Warrants so transferred. Upon any
partial transfer, the Company will issue and deliver to Holder a new
Warrant or Warrants with respect to the Warrants not so transferred.
Notwithstanding the foregoing, Holder shall not be entitled to transfer a
number of shares or an interest in this Warrant representing less than
five percent (5%) of the aggregate shares initially covered by this
Warrant. Any transferee shall be subject to the same restrictions on
transfer with respect to this Warrant as the Purchaser.
4.2 Securities Laws. Upon any issuance of shares of Common Stock upon
exercise of this Warrant, it shall be the Company's responsibility to
comply with the requirements of: (1) the 1933 Securities Act; (2) the
Securities Exchange Act of 1934, as amended; (3) any applicable listing
requirements of any national securities exchange; (4) any state securities
regulation or "Blue Sky'' laws; and (5) requirements under any other law
or regulation applicable to the issuance or transfer of such shares. If
required by the Company, in connection with each issuance of shares of
Common Stock upon exercise of this Warrant, the Holder will give: (i)
assurances in writing, satisfactory to the Company, that such shares are
not being purchased with a view to the distribution thereof in violation
of applicable laws, (ii) sufficient information, in writing, to enable the
Company to rely on exemptions from the registration or qualification
requirements of applicable laws, if available, with respect to such
exercise, (iii) the legal opinion required by the restrictive legend set
forth at the beginning of this Warrant and (iv) its cooperation to the
Company in connection with such compliance.
4.3 Exchange. Subject to compliance with applicable federal and state
securities laws, this Warrant is exchangeable at the principal office of
the Company for Warrants to purchase the same number of shares of Common
Stock purchasable hereunder, each new Warrant
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<PAGE> 9
to represent the right to purchase such number of shares of Common Stock as
Holder shall designate at the time of such exchange. Each new Warrant shall
be identical in form and content to this Warrant, except for appropriate
changes in the number of shares of Common Stock covered thereby, the
aggregate purchase price of such shares, the percentage stated in Section
4.1 above, and any other changes which are necessary in order to prevent
the Warrant exchange from changing the respective rights and obligations of
the Company and the Holder as they existed immediately prior to such
exchange.
4.4 Loss or Mutilation. Upon receipt by the Company of evidence satisfactory
to it of the ownership of, and the loss, theft, destruction or mutilation
of, this Warrant and (in the case of loss, theft, or destruction) of
indemnity satisfactory to it, and (in the case of mutilation) upon
surrender and cancellation hereof, the Company will execute and deliver in
lieu hereof a new Warrant.
ARTICLE V
HOLDER RIGHTS
5.1 No Shareholder Rights Until Exercise. No Holder hereof, solely by virtue
hereof, shall be entitled to any rights as a shareholder of the Company.
Holder shall have all rights of a shareholder with respect to securities
purchased upon exercise hereof at the time of cash or deemed exercise
pursuant to Sections 2.1 and 2.2 hereof.
5.2 Registration Rights. The Company agrees that any shares of Common Stock
issued to Holder upon exercise of this Warrant shall be subject to the
registration rights set forth in the Registration Rights Agreement of even
date herewith among the Company, the Purchaser and others.
ARTICLE VI
MISCELLANEOUS
6.1 Additional Covenants by the Company. The Company further covenants and
agrees that it will:
a. Give each Holder prompt written notice of any intended changes to
the composition of its capital structure, whether by issuance of
new securities or otherwise;
b. Give each Holder written notice of any shareholders' meeting and
will allow a representative of each Holder to attend such
meetings;
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<PAGE> 10
c. Give each Holder at least five days' prior written notice of any
action that the Company intends to take by shareholders' written
consent;
d. Allow, upon reasonable notice and at reasonable times, the
inspection of its minute book and other corporate records by a
representative of the Holder; and
e. Not engage, other than on arm's length terms, in any transaction
with any of its shareholders or affiliates (as such term is
defined under Rule 144 issued by the Securities and Exchange
Commission under the 1933 Securities Act, as amended).
6.2 Governmental Approvals. The Company will from time to time take all
action which may be necessary to obtain and keep effective any and all
permits, consents and approvals of governmental agencies and authorities
and securities acts filings under federal and state laws, which may be or
become requisite in connection with the issuance, sale, and delivery of
this Warrant, and the issuance, sale and delivery of the shares of Common
Stock or other securities or property issuable or deliverable upon
exercise of this Warrant.
6.3 Governing Laws. It is the intention of the parties hereto that except as
set forth below, the internal laws of the State of Connecticut, U.S.A.
(irrespective of its choice of law principles) shall govern the validity
of this warrant, the construction of its terms, and the interpretation and
enforcement of the rights and duties of the parties hereto, provided that
the corporation laws of the State of Delaware shall govern the procedural
and substantive matters pertaining to the due authorization. issuance,
delivery and exercise of this Warrant and the shares of Common Stock upon
exercise hereof. Except as set forth below, the parties hereby agree that
any suit to enforce any provision of this Warrant arising out of or based
upon this Warrant or the business relationship between any of the parties
hereto shall be brought in the United States District Court for the
District of Delaware or the courts of the State of Delaware located in
Wilmington, Delaware. Each party hereby agrees that such courts shall have
personal jurisdiction and venue with respect to such party, and each party
hereby submits to the personal jurisdiction and venue of such courts. In
addition to the foregoing jurisdiction, Holder at its sole option, may
commence any such suit in any jurisdiction in which the Company has a
business office or is incorporated.
6.4 Binding Upon Successors and Assigns. Subject to, and unless otherwise
provided in, this Warrant, each and all of the covenants, terms
provisions, and agreements contained herein shall be binding upon, and
inure to the benefit of the permitted successors, executors, heirs,
representatives, administrators and assigns of the parties hereto.
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<PAGE> 11
6.5 Severability. If any one or more provisions of this Warrant, or the
application thereof, shall for any reason and to any extent be invalid or
unenforceable, the remainder of this Warrant and the application of such
provisions to other persons or circumstances shall be interpreted so as
best to reasonably effect the intent of the parties hereto. The parties
further agree to replace any such void or unenforceable provisions of this
Warrant with valid and enforceable provisions which will achieve, to the
extent possible, the economic, business and other purposes of the void or
unenforceable provisions.
6.6 Default, Amendment and Waivers. This Warrant may be amended upon the
written consent of the Company and the Holder. The waiver by a party of
any breach hereof for default in payment of any amount due hereunder or
default in the performance hereof shall not be deemed to constitute a
waiver of any other default or any succeeding breach or default. It shall
be an event of default under this Warrant if the Company breaches any term
or condition hereof or fails to perform any obligation as and when
required hereunder and such breach or failure is not cured within thirty
(30) days after receiving written notice thereof from Holder. Upon such
event of default, the Warrant Price for all shares shall be reduced by
one-fifth and thereafter shall continue to be reduced by one-fifth from
the then adjusted Warrant Price for each successive thirty (30) day period
in which such breach is not cured.
6.7 No Waiver. The failure of any party to enforce any of the provisions
hereof shall not be construed to be a waiver of the right of such party
thereafter to enforce such provisions.
6.8 Attorneys' Fees. Should suit be brought to enforce or interpret any part
of this Warrant, the prevailing party shall be entitled to recover, as an
element of the costs of suit and not as damages, reasonable attorneys fees
to be fixed by the court (including without limitation, costs, expenses
and fees on any appeal). The prevailing party shall be the party entitle
to recover its costs of suit, regardless of whether such suit proceeds to
final judgment. A party not entitled to recover its costs shall not be
entitled to recover attorneys' fees. No sum for attorneys' fees shall be
counted in calculating the amount of a judgment for purposes of
determining if a party is entitled to recover costs or attorneys' fees.
6.9 Notices. Whenever any party hereto desires or is required to give any
notices, demand, or request with respect to this Warrant, each such
communication shall be in writing and shall be effective only if it is
delivered by personal service or delivered by a nationally recognized
overnight courier, in each case addressed to the parties hereto at their
respective addresses set forth at the beginning of this Agreement. Such
communication shall be effective when they are received by the addressee
thereof. Any party may change its address for such communications by
giving notice thereof to the other party in conformity with this Section.
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<PAGE> 12
6.10 Time. Time is of the essence of this Warrant.
6.11 Construction of Agreement. This Warrant has been negotiated by the
respective parties hereto and their attorneys and the language hereof
shall not be construed for or against any party.
6.12 No Endorsement. Holder understands that no federal or state securities
administrator has made any finding or determination relating to the
fairness of investment in the Company or purchase of the Common Stock
hereunder and that no federal or state securities administrator has
recommended or endorsed the offering of securities by the Company
hereunder.
6.13 Pronouns. All pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person, persons, entity or entities may require.
6.14 Further Assurances. Each party agrees to cooperate fully with the other
parties and to execute such further instruments, documents and
agreements and to give such further written assurances, as may be
reasonably requested by any other party to better evidence and reflect
the transactions described herein and contemplated hereby, and to carry
into effect the intents and purposes of this Warrant.
IN WITNESS WHEREOF, the undersigned Company has caused this Common Stock
Warrant to be executed and delivered on the date first above written by its
President, thereunto duly authorized.
COMPANY:
Centrum Industries, Inc.
By: /s/ George H. Wells
----------------------------
George Wells
Its President
<PAGE> 1
EXHIBIT 10.7
THIS AGREEMENT IS SUBJECT TO A SUBORDINATION AGREEMENT DATED AS OF THE DATE
HEREOF AMONG THE COMPANY, THE INVESTORS (AS HEREIN DEFINED) AND THE HUNTINGTON
NATIONAL BANK (THE "LENDER"), THAT, AMONG OTHER THINGS, SUBORDINATES THE
COMPANY'S OBLIGATIONS TO SAID INVESTORS TO THE COMPANY'S OBLIGATIONS TO THE
LENDER.
PUT AGREEMENT
AGREEMENT made and entered into by and among MORAMERICA CAPITAL,
CORPORATION, FIRST NEW ENGLAND CAPITAL LIMITED PARTNERSHIP and NORTH DAKOTA
SMALL BUSINESS INVESTMENT COMPANY, A NORTH DAKOTA LIMITED PARTNERSHIP
(collectively, the "INVESTORS") and CENTRUM INDUSTRIES, INC. (the "COMPANY").
R E C I T A L S
A. Simultaneously with the execution of this Agreement, the Company is
entering into a Note and Warrant Purchase Agreement with the Investors (the
"PURCHASE AGREEMENT") providing for the issuance by the Company to each
Investor of (i) an 11% Convertible Subordinated Note due March 31, 2001, such
notes aggregating $2,500,000.00 in principal amount and (ii) one or more
Warrants to purchase Common Stock of the Company.
B. The Company and the Investors desire to set forth certain
understandings respecting said Warrants and the Securities (as hereinafter
defined).
NOW, THEREFORE, in consideration of the mutual and dependent covenants
hereinafter set forth, the Company and the Investors agree as follows:
1. Definitions.
a. As used herein, the following terms shall have the
following meanings:
"Change In Control Event" shall mean the occurrence of any of
the following after the date hereof: (i) any Person or related
Persons constituting a Group become the "beneficial owners" (as
such term is used in Rule 13d-3 under the Exchange Act as in effect
on the date hereof), directly or indirectly, of more than 30% of
the total voting power of all classes then outstanding of the
Company's voting stock, or (ii) the acquisition by any Person or
related Persons constituting a Group (a) of the power to elect,
appoint or cause the election of at least a majority of the members
of the board of directors of the Company through beneficial
ownership of the capital stock of the Company or otherwise, or (b)
of all or substantially all of the properties and assets of the
Company, or (iii) the merger or consolidation of the Company with
or into any other person, firm or entity if the Company is not the
surviving entity in such merger or consolidation.
"Common Stock" shall mean any and all capital stock of the
Company, however designated, that is not limited as to amount of
dividends or that is not limited as to the amount of distributions
upon liquidation or dissolution of the Company.
<PAGE> 2
"Earnings Value" shall mean an amount, the calculation of
which shall be based upon the Company's audited financial
statements for the most recent full fiscal year preceding the
Exercise Date, which is equal to a multiple of five and one-half
(5.5) times the Company's earnings before interest, taxes,
depreciation and amortization as set forth in such audited
financial statements or as otherwise determined by the Company's
independent certified public accountants, which determination shall
be binding and conclusive upon the parties hereto in the absence of
demonstrable error.
"Exchange Act" shall mean the Securities Exchange Act of 1934
as in effect on the date hereof.
"Exercise Date" shall mean, with respect to a Warrant or
Security. the date of exercise by the Requisite Holders, in the
manner herein provided, of the right to require the Company to
purchase such Warrant or Security.
"Fair Market Value" of the Company shall mean fair market
value determined in accordance with Section 4 hereof.
"Group" shall mean such term as used in Rule 13d-5 under the
Exchange Act.
"Holder" shall mean any person who holds a legal or beneficial
interest in a Warrant or Security.
"Lender" shall mean The Huntington National Bank.
"Note" shall have the meaning ascribed to such term in the
Purchase Agreement.
"Person" shall mean such term is used in Sections 13(d) and
14(d) of the Exchange Act.
"Purchase Price" shall mean either the purchase price for the
Warrants determined pursuant to Section 3.a of this Agreement or
the purchase price for the Securities determined pursuant to 3.b of
this Agreement. In no event shall the Purchase Price as so
determined be reduced or discounted on account of the fact that a
Warrant or Security may represent a minority interest in the
Company, or may not be freely transferable under federal or state
securities laws, or for any other reason.
"Put Option" shall mean each right of the Requisite Holders to
require the Company to purchase outstanding Warrants and Securities
in accordance with Section 2 hereof.
"Qualified Public Offering" shall mean a public offering of
Common Stock of the same class of stock issuable pursuant to the
Warrants and the Notes on a firmly underwritten basis pursuant to a
registration statement on Forms S-1, S-2
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<PAGE> 3
or SB-2 (or similar form of general application prescribed by the
Securities and Exchange Commission) filed under the Securities Act
of 1933, as amended.
"Requisite Holders" shall mean the Holders of 100% of the
Total Shares.
"Security" shall mean (i) Common Stock issued upon exercise of
a Warrant and (ii) Common Stock issued upon conversion of all or
any portion of a Note.
"Subordination Agreement" shall have the meaning ascribed to
such term in the Purchase Agreement.
"Total Shares" shall mean, as of any date of determination,
the sum of (1) the number of shares of Warrant Issuable Stock, plus
(2) the number of shares of Common Stock theretofore issued
pursuant to the exercise of Warrants, plus (3) the number of shares
of Common Stock theretofore issued pursuant to the conversion of
Notes in whole or in part.
"Warrant" shall mean a Warrant issued to an Investor or other
Holder by the Company pursuant to the Purchase Agreement,
representing the right to acquire shares of the Company's Common
Stock, together with any and all warrants, options or rights
(including but not limited to rights under convertible securities
other than the Notes) that may be issued to an Investor or other
Holder in replacement or substitution therefor.
"Warrant Issuable Stock" shall mean, for any Warrant, Common
Stock which would be acquired upon the exercise thereof, taking
into account any adjustments in such number of shares as provided
for in such Warrants.
"Warrant Percentage" shall mean, as of any date of
determination, and for any Warrant, the percent equivalent of a
fraction, (i) the numerator of which is the total number of shares
of Warrant Issuable Stock, and (ii) the denominator of which is the
sum of (a) the total number of shares of Common Stock of the
Company then outstanding (including, without limitation all
Securities), plus (b) the total number of shares of Warrant
Issuable Stock of all Warrants.
"Year" shall mean each period of twelve (12) consecutive
calendar months beginning with the effective date of this
Agreement.
b. Terms defined in this Agreement in the singular shall have a
comparable meaning when used in the plural, and vice versa. The neuter gender
shall also denote the masculine and feminine where the context so permits. The
words "hereof", "herein" and "hereunder", and words of similar import, when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. The headings in this Agreement are for
purposes of reference only and shall not be considered in construing this
Agreement.
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<PAGE> 4
2. Put By Investors.
a. The Requisite Holders shall have the right to require the Company to
purchase all or a portion of the outstanding Warrants and Securities held by
all Holders (a "Put Option"):
(i) At any time after the date hereof, upon the occurrence of a Change
In Control Event, provided that the Requisite Holders exercise such
right within one year of the last date upon which each Investor obtains actual
knowledge of the occurrence or such change in Control Event, subject, however
to subsection (b) of this Section 2; or
(ii) At any time after the last day of the fifth (5th) Year.
b. The failure of the Requisite Holders to exercise a Put Option upon any
occasion shall not be deemed a bar to or a waiver of the right of the Requisite
Holders to exercise a Put Option on any other occasion. A Put Option shall be
exercisable only by notice given in the manner provided in Section 6 below.
The Purchase Price payable to each Holder upon the exercise of the Put Option
shall be determined pursuant to Section 3 hereof, provided that such Holder
may, in its sole discretion, net the Aggregate Price (as defined in the
Warrant) of the outstanding Warrants and the value of the Securities (after
giving effect in either case to all adjustments required by Article III of the
Warrant) against the Purchase Price therefor. The Purchase Price shall be
payable as provided in Section 5 hereof, subject to the provisions of Section
5(h) hereof.
3. Purchase Price. Upon the exercise of a Put Option:
a. the Purchase Price payable by the Company to each Holder with respect
to a Warrant shall be determined as follows:
(i) If, on the Exercise Date, the Fair Market Value of the Company shall
be less than the Earnings Value of the Company, then the Purchase Price shall
be, for each such Warrant, the Earnings Value multiplied by the Warrant
Percentage on such Exercise Date;
(ii) If, on the Exercise Date, the Fair Market Value of the Company
exceeds the Earnings Value of the Company, then the Purchase Price shall be,
for each Warrant, the Fair Market Value of the Company multiplied by the
Warrant Percentage on such Exercise Date.
b. the Purchase Price payable by the Company to each Holder with respect
to Securities shall be determined as follows:
(i) If, on the Exercise Date, the Fair Market Value of the Company shall
be less than the Earnings Value of the Company, then the Purchase Price shall
be the Earnings Value multiplied by a fraction, the numerator of which shall be
the number of shares of Securities to be sold and the denominator of which
shall be the sum of (a) the number of shares of Common Stock of the Company
outstanding on the Exercise Date (including, without limitation, all
Securities), plus (b) the number of shares of Warrant Issuable Stock of all
Warrants.
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<PAGE> 5
(ii) If, on the Exercise Date, the Fair Market Value of the Company
exceeds the Earnings Value of the Company, then the Purchase Price shall be the
Fair Market Value of the Company multiplied by a fraction, the numerator of
which shall be the number of shares of Securities to be sold and the
denominator of which shall be the sum of (a) the number of shares of Common
Stock of the Company outstanding on the Exercise Date (including, without
limitation, all Securities), plus (b) the number of shares of Warrant Issuable
Stock of all Warrants.
4. Fair Market Value. If, within thirty (30) days after the Exercise Date, the
Company and the Requisite Holders agree upon the Fair Market Value of the
Company, then the Fair Market Value shall be as so agreed. If, within such
thirty (30) day period, the Requisite Holders and the Company agree upon an
appraiser to determine such Fair Market Value, then such appraiser shall make
such determination and such appraisal shall govern. If the Company and the
Requisite Holders do not, within thirty (30) days after the Exercise Date,
agree as to such Fair Market Value or as to a single appraiser to determine
Fair Market Value, then the Requisite Holders shall, by notice to the Company,
appoint one appraiser, and the Company shall, by notice to all of the Holders,
appoint one appraiser, both of whom shall be disinterested, experienced in the
appraisal of companies engaged in businesses similar to those of the Company at
the time of such appointment, and shall belong to a recognized professional
association. If either the Requisite Holders or the Company shall fail to
appoint such an appraiser within thirty (30) days after the lapse of such
thirty (30) day period, then the appraiser appointed by the party (the
Requisite Holders being deemed a "party" for the purpose of this Section 4)
that does appoint an appraiser shall make the appraisal of such Fair Market
Value and such appraisal shall govern. If two appraisers are appointed and
they agree upon such Fair Market Value, their joint determination shall govern.
If said two appraisers cannot reach agreement within 30 days after the
appointment of the last appraiser to be appointed, the two appraisers selected
shall promptly appoint a third appraiser who is disinterested, experienced in
the appraisal of companies engaged in businesses similar to those of the
Company at the time of such appointment, and a member of a recognized
professional association, and the agreed decision of the three appraisers shall
govern or, if the three appraisers cannot agree as to such Fair Market Value,
then the average of the two appraisals closest in amount shall be considered
such Fair Market Value. In determining Fair Market Value, the exercise price
for any Warrants to be sold to the Company shall be deemed to have been paid to
the Company. In addition, with respect to any assets owned by the Company that
represent interests in other companies, Fair Market Value shall be determined
hereunder without reduction or discount of the value of any such assets on
account of the fact that such assets may represent a minority interest in such
other companies or may not be freely transferable under federal or state
securities laws, or for any other reason. All appraisal reports shall be
rendered in writing and shall be signed by the appraiser(s). The appraised
Fair Market Value of the Company, determined as herein provided, shall be final
and conclusive on the Company and the Holders and shall be enforceable in any
court having jurisdiction over a proceeding brought to seek such enforcement.
The costs of appraisal shall be borne 50% by the Company and 50% by the
Holders.
5. Closing.
a. The Closing of the purchase and sale of the Warrants and Securities
pursuant to this Agreement (the "Closing") shall take place on, and payment for
such Warrants or Securities shall be made in accordance herewith on the later
of (A) the one hundred twentieth (120th) day
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<PAGE> 6
after the Exercise Date and (B) the thirtieth (30th) day following the
determination of Fair Market Value pursuant to Section 4 of the Agreement.
Notwithstanding anything herein to the contrary, the Purchase Price for all
outstanding Warrants and Securities shall in any case be immediately due and
payable in full, without the need for notice from, demand by or any other
action of, the Holders thereof if there shall occur an Event of Default
described in either Subsection (d) or (e) of Section 7.1 of the Purchase
Agreement (whether or not any Note is then outstanding). The Closing shall
take place at 10:00 A.M. on the closing date at the Company's principle
offices, or at such other locations as the parties may mutually agree.
b. The Purchase Price shall be paid by the Company at the Closing in cash,
by wire transfer of funds or by bank cashier's or certified check, against
delivery by the Holders of the Warrant and Securities, duly endorsed for
transfer to the Company, which Warrants and Securities shall be delivered to
the Company free and clear of all liens and encumbrances of any kind, nature
and description.
c. If at the Closing the Company fails for any reason to pay the Purchase
Price for any Warrant or Security, then any portion of such cash amount due
that is not paid shall bear interest from the date of closing at a rate of
interest equal to lesser of (i) 18% per annum and (ii) the highest rate of
interest allowed by applicable law. The provisions of this Section 5.c shall
not be construed to limit any other right or remedy that any Holder may have on
account of failure by the Company to purchase any Warrant or Security as herein
provided.
d. If at the Closing the Company fails for any reason to pay the entire
Purchase Price as provided herein for any Warrant and Security, and if any
fiscal year-end of the Company occurs while such failure continues, then, at
the option of the Requisite Holders, the Earnings Value of the Company shall be
recomputed so that all components used in the calculation thereof shall be
based upon the amounts for and at the end of such recently ended fiscal year,
and the Purchase Price shall be recomputed accordingly; provided, however, that
the Requisite Holders shall, following any such recomputation, have the right,
in their sole discretion, to require that the Purchase Price remain an amount
calculated without giving effect to any such recomputation pursuant to this
Section 5.d. Nothing contained in this Section 5.d shall be deemed to impair
any Holder's right to interest under Section 5.c hereof.
e. If a Put Option is exercised pursuant to this Agreement, the failure of
the Company to have sufficient funds legally available for the purchase of any
Warrants or Securities shall not excuse the Company's failure to purchase such
Warrants or Securities in accordance with the terms of this Agreement, and the
Company shall be and remain liable for the full amount of all sums payable in
accordance with the terms hereof until paid in full, and all adjustments
contemplated hereby or by the Warrants on account of such failure (including,
without limitation, the adjustments contemplated by Section 5.d above) shall be
made as contemplated hereby and thereby. However, the provisions of this
Section 5 shall not be construed so as to require the Company to make any
purchase of or payment for any Warrants or Securities other than out of funds
legally available therefor under Delaware law; accordingly, if the Company does
not, at the time of a closing, have sufficient funds legally available for the
purchase of any Warrant or Security that it is obligated to purchase, then the
Company shall use those funds that are legally available to purchase the
maximum shares of Securities or portion of the Warrant or Warrants representing
the right to purchase such maximum number of shares, pro rata among the
Holders, based upon the allocation formula given in Section 5.f, below. At
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<PAGE> 7
any time thereafter when additional funds of the Company become legally
available, the Company will immediately use such funds to purchase all shares
of Securities, or the Warrant or Warrants representing the right to purchase
such shares that it is then obligated to purchase and pay for hereunder. Such
purchase shall be pro rata among the Holders in accordance with the formula
given in Section 5.f below to the extent that legally available funds are then
not available to purchase all such shares or Warrants. No Holder shall,
however, be required to sell any Warrants or Securities to the Company unless
and until the Company purchases, with legally available funds, such Warrant or
Security in accordance herewith.
f. In the event of any required pro rata purchase of Warrants or
Securities among the Holders thereof in accordance with the provisions of
Section 5.e above, the amount of Warrants (or portions thereof) or Securities
to be purchased from each Holder shall be the product of (i) the total number
of shares of Securities and Warrant Issuable Stock to be purchased in
accordance with Section 5.e, multiplied by (ii) a fraction, (A) the numerator
of which is sum of (I) the number of such Holder's shares of Securities plus
(II) the number of shares of Warrant Issuable Stock, and (B) the denominator of
which is the sum of (I) the total number of shares of Securities of all Holders
plus (II) the total number of shares of Warrant Issuable Stock of all Holders.
g. If the Company is obligated to purchase any Warrants or Securities, and
if the Company does not have sufficient funds legally available therefor, then
the Company shall take any and all action necessary to increase its legally
available funds to an amount sufficient therefor, including, without
limitation, a recapitalization or a revaluation of its assets.
h. The Company shall make each payment required under this Agreement when
and as required but only to the extent that such payment is a "Permitted
Payment" (as such term is defined in the Subordination Agreement). Any payment
required hereunder but not made because it is not a "Permitted Payment" shall
be made immediately upon it becoming a "Permitted Payment".
6. Notice; Action by Requisite Holders. All Notices hereunder shall be in
writing and shall be deemed given when personally delivered or delivered by a
nationally recognized overnight courier, in each case addressed to the intended
recipients thereof at their addresses determined pursuant to the Purchase
Agreement. All action by the Requisite Holders, including without limitation
the election to exercise a Put Option in accordance with Section 2 hereof, or
any agreement as to Fair Market Value or the appointment of an appraiser in
accordance with Section 4 hereof, shall be evidenced by a writing executed by
the Requisite Holders (or by any number of counterpart writings executed by not
less than 100% of the Holders of the Total Shares, which taken together shall
be deemed to be a single writing executed by the Requisite Holders,
notwithstanding that all of the Requisite Holders are not signatories to the
same counterpart).
7. Termination. This Put Agreement shall terminate upon the earlier of the date
that is:
a. the one hundred eighty-first (181st) day after the completion of a
Qualified Public Offering (the "Offering Period Termination Date") provided,
however, that each of the following conditions shall have been satisfied:
-7-
<PAGE> 8
(i) as of the date immediately preceding the Offering Period
Termination Date, the aggregate proceeds (after deduction of offering
expenses including but not limited to underwriting and sales commissions)
received by the Company as a result of such Qualified Public Offering equals or
exceeds ten million ($10,000,000) dollars;
(ii) the shares offered to the public pursuant to such Qualified Public
Offering (the "Offered Shares") during the period commencing on the date that
the Offered Shared are first offered to the public (the "Offering Date") and
ending on the date of the completion thereof (the "Completion Date") are sold
to the public a price per share of no less than $5.50;
(iii) at all times during the period commencing on the Completion Date
and ending on the date immediately preceding the Offering Period
Termination Date (the "Offering Period"), the Offered Shares were listed on the
New York Stock Exchange, the American Stock Exchange, the NASDAQ -- National
Market Issues system or the NASDAQ -- Small-Cap Issues system; and
(iv) the average bid price for the Offered Shares during the Offering
Period, as reported on the exchange or system upon which they are listed shall
be equal to or greater than $5.50 per share:
b. the date immediately following the last day of the eighth (8th) Year;
or
c. the date upon which Notes, Warrants or Securities are outstanding.
Certain of the other Finance Documents (as such term is defined in the Purchase
Agreement) expressly refer to this Agreement when defining terms contained
therein. All capitalized terms defined herein which are defined in such
Finance Documents by reference to this Agreement shall survive the termination
of this Agreement for the purpose of providing the intended definitions in such
other Finance Documents.
8. Multiple Holders. Subject to applicable securities laws, each Holder has the
right to transfer any Security and all or any portion of any Warrant to third
party Holders. The rights of such third-party Holder as the Holder of the
Warrants or Securities shall apply equally to such subsequent Holders.
9. Miscellaneous.
a. This Agreement may be executed in any number of counterparts which,
when executed and delivered by all parties hereto, shall be binding on all
parties hereto and shall constitute one Agreement, notwithstanding that all
parties are not signatory to the same counterpart.
b. This Agreement shall he binding upon and shall inure to the benefit of
the Company, each Investor, and their respective successors and assigns.
c. The Company shall pay to each Holder, on demand, all costs and expenses
(including, without limitation, court costs and reasonable attorneys' fees)
paid or incurred by
-8-
<PAGE> 9
such Holder in collecting any sums due from, or enforcing any other obligation
of, the Company hereunder.
d. This Agreement shall be construed and enforced in accordance with, and
shall be governed by, the internal laws of the State of Connecticut without
regard to its conflicts of law rules.
IN WITNESS WHEREOF, the Company and the Investors have caused this
Agreement to be executed by their respective representatives hereunto duly
authorized, under seal as of the 29th day of February, 1996, but the effective
date of this Agreement shall be March 8, 1996.
CENTRUM INDUSTRIES, INC.
By: /s/ George Wells
--------------------------------
George Wells
Its President
(Duly Authorized)
FIRST NEW ENGLAND CAPITAL LIMITED
PARTNERSHIP
By: FINEC Corp., its General Partner
By: /s/ Richard Klaffky
--------------------------------
Richard Klaffky, its President
(Duly Authorized)
MORAMERICA CAPITAL CORPORATION
By: InvestAmerica Investment Advisors, Inc., its
Investment Adviser
By: /s/ David Schroder
--------------------------------
David Schroder, its President
(Duly Authorized)
-9-
<PAGE> 10
NORTH DAKOTA SMALL BUSINESS
INVESTMENT COMPANY, A NORTH
DAKOTA LIMITED PARTNERSHIP
By: InvestAmerica ND Management, Inc., its
Investment Adviser
By: /s/ David Schroder
--------------------------------------
David Schroder, its President
(Duly Authorized)
-10-
<PAGE> 1
EXHIBIT 10.8
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement") is made as of February
28, 1996 and effective March 8, 1996, by and among MORAMERICA CAPITAL
CORPORATION, FIRST NEW ENGLAND CAPITAL LIMITED PARTNERSHIP and NORTH DAKOTA
SMALL BUSINESS INVESTMENT COMPANY, A NORTH DAKOTA LIMITED PARTNERSHIP
(collectively, the "Investors") and CENTRUM INDUSTRIES, INC. (the "Company").
In consideration of the mutual covenants hereinafter set forth the Company
and the Investors agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
have the following meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Common Stock" shall have the meaning ascribed to it in the Notes and
warrants.
"Holder" shall mean a holder of a Warrant and/or a Note so long as such
holder continues to hold the Warrant, Note or any Registrable Securities, and
subject to Section 9 hereof, any other holder of any Warrant, Note or
Registrable Securities as hereinafter defined.
"Note" or "Notes" shall mean the Company's 11% Convertible Subordinated
Notes in the aggregate principal amount of $2,500,000 issued pursuant to the
Purchase Agreement.
"Purchase Agreement" shall mean the Note and Warrant Purchase Agreement
of even date herewith providing for the sale by the Company to the Investors of
the Notes and Warrants.
The terms "register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registrable Securities" shall mean (i) shares of Common Stock issued or
issuable upon exercise of a Warrant, (ii) shares of Common Stock issued or
issuable upon conversion of any portion of the Notes and (iii) any Common Stock
issued in respect of such securities upon any stock split, stock dividend,
recapitalization or similar event.
"Registration Expenses" shall mean all expenses incurred by the Company in
compliance with Section 2 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursement of
counsel for the Company, blue sky fees and expenses, and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company and expenses of regular
annual and periodic audits, which shall be paid in any event by the Company)
and the expenses associated with the Company's obligations under Section 4
hereof.
<PAGE> 2
"Restricted Securities" shall refer collectively to the securities of
the Company required to bear a legend under applicable securities laws.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder, all as the same shall
be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all fees and
disbursements of one counsel for the Holders.
"Warrant" or "Warrants" shall mean any Common Stock Warrant, and any
other warrant of any series or designation, for shares of Common Stock, issued
and sold pursuant to the Purchase Agreement.
2. Piggyback Registration Rights
(a) If the Company shall determine to register any of its securities
either for its own account or the account of any security holder or
holders (other than a Holder), other than a registration relating solely
to employee benefit plans or pursuant to a registration statement on Form
S-4 or the then equivalent of such form, the Company will:
(i) Promptly give to all Holders written notice thereof; and
(ii) Except as set forth in Section 2(b), include in such
registration (and any related qualification under state blue sky
laws and other compliance filings, and in any underwriting
involved therein), all the Registrable Securities specified in
a written request or requests, given by each Holder within
fifteen (15) days after the written notice from the Company is
given.
(b) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall
so advise each Holder as part of the written notice given pursuant to
Section 2(a)(i). In such event the right of each Holder to registration
pursuant to this Section 2 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein.
Each such Holder, together with the Company and the other persons
distributing their securities through such underwriting, shall enter into
an underwriting agreement in customary form with the underwriter or
underwriters selected or approved for underwriting by the Company.
Notwithstanding any other provision of this Section 2, if the underwriter
determines that marketing factors require a limitation on the number of
shares to be underwritten, the underwriter may (subject to the allocation
priority set forth below) exclude from such registration and underwriting
some or all of each Holder's Registrable Securities which would otherwise
be underwritten pursuant hereto. The Company shall so advise all persons
requesting registration, and the number of shares of securities that are
entitled to be included in the registration and underwriting shall be
allocated in the following manner: before any Holder shall be entitled
to include Registrable Securities in the registration, there shall first
be included in such registration (i) the number of securities
-2-
<PAGE> 3
which the Company proposed to offer and sell for its own account, and
(ii) securities with respect to which the holders have requested
inclusion pursuant to any and all registration rights which have been
granted by the Company prior to the date hereof, and then, to the extent
permitted by the underwriter, there shall be included in such
registration that number of securities which persons having registration
rights on parity with the Holders shall have requested to be included in
such registration, with any limitation on the number of securities so
included to be imposed pro rata on all Holders and all other persons to
the extent they request inclusion therein. If any Holder or any officer,
director or other security holder requesting registration disapproves of
the term of any such underwriting, such person may elect to withdraw
therefrom by written notice to the Company and the underwriter. Any
Registrable Securities or other securities excluded or withdrawn from
such underwriting shall be withdrawn from such registration.
3. Expenses of Registration. All Registration Expenses incurred on behalf
of each Holder in connection with any registration, qualification or compliance
pursuant to this Agreement shall be borne by the Company, and all Selling
Expenses shall be borne by each Holder and all other holders of the securities
so registered pro rata on the basis of the number of their shares so
registered.
4. Registration Procedures. In the case of each registration effected by
the Company pursuant to this Agreement, the Company will advise each Holder in
writing as to the initiation of each registration and as to the completion
thereof. The Company will:
(a) Keep such registration effective for a period of ninety (90)
days or until each Holder has completed the distribution described in the
registration statement relating thereto, whichever first occurs.
(b) Furnish such number of prospectuses and other documents incident
thereto as each Holder from time to time may reasonably request.
(c) Register or qualify the Registrable Securities covered by such
registration under such other securities or blue sky laws of such
jurisdiction (subject to the approval of any managing underwriter
involved) as each Holder shall reasonably request, and do any and all
other acts and things which may be reasonably necessary or advisable to
enable each Holder to consummate the disposition in such jurisdictions of
the Registrable Securities; provided, however, that the Company shall not
be obligated, by reason thereof, to qualify as a foreign corporation in
any jurisdiction where it would not otherwise be required to qualify or
consent to general service of process in any such jurisdiction or subject
itself to taxation as doing business in any such jurisdiction.
(d) Notify each Holder promptly after the Company shall receive
notice or have knowledge that any registration statement, supplement or
amendment has become effective, any registration statement is required to
be amended or supplemented, any stop order has been issued, of the
suspension of the qualification of the Registrable Securities for sale in
any jurisdiction or the initiation of a proceeding for that purpose, or
of the happening of any event as a result of which, the prospectus
included in such registration statement as then in effect, includes an
untrue statement of a material fact or omits to
-3-
<PAGE> 4
state any material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances under which they were made.
(e) Make every reasonable effort to obtain at the earliest possible
moment the withdrawal of any order suspending the effectiveness of a
registration statement or suspending the qualification of any of the
Registrable Securities for sale in any jurisdiction.
(f) Promptly prepare and furnish to each Holder a reasonable number
of copies of a supplement to or an amendment of a prospectus as may be
necessary so that such prospectus shall not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made.
(g) Include the Registrable Securities for listing on any national
securities exchange on which the Company's Common Stock is listed.
(h) Make available for inspection by a representative of each
Holder, any underwriters participating in any disposition pursuant
hereto, and any attorney or accountant retained by such Holders or such
underwriters, upon reasonable notice during normal business hours all
financial and other records, pertinent corporate documents and properties
of the Company, and cause the Company's officers, directors and employees
to supply all information reasonably requested by any such
representative, underwriter, attorney or accountant in connection with
such registration; provided that any such records, information or
documents that are designated by the Company in writing as confidential
shall be kept confidential by such persons unless disclosure of such
records, information or documents is required by court or administrative
order.
(i) Make generally available to its securities holders earnings
statements satisfying the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder.
5. Indemnification
(a) In the event of the registration of any Holder's Registrable
Securities under the Securities Act pursuant to this Agreement, the
Company will indemnify and hold harmless each such Holder, each
underwriter, if any, of such shares, and each other person, if any, who
controls each such Holder or any such underwriter within the meaning of
the Securities Act, against any losses, claims, damages or liabilities,
joint or several, to which each such Holder, the underwriter or
controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained, on
the effective date thereof, in any registration statement under which
such Registrable Securities were registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein (as such may
be amended or supplemented), or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, and will reimburse each such Holder, each such underwriter,
and each such controlling person for
-4-
<PAGE> 5
any legal or any other expenses reasonably incurred by such Holder, such
underwriter or controlling person, in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is
based upon any untrue statement or alleged untrue statement or omission
or alleged omission made in such registration statement, such preliminary
prospectus, or such final prospectus (as such may be amended or
supplemented) in reliance upon and in conformity with, written
information furnished to the Company by the Holder, the underwriter or
controlling person specifically for use in preparation thereof.
(b) In the event of the registration by the Company of any Holder's
Registrable Securities, such Holder will indemnify and hold harmless the
Company, each underwriter and each person who controls the Company or any
such underwriter within the meaning of the Securities Act, against any
losses, claims, damages or liabilities, joint or several, to which the
Company, such underwriter or controlling person may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material
fact contained in any registration statement under which such Registrable
Securities were registered under the Securities Act, any prospectus or
preliminary prospectus contained therein, or amendment or supplement
thereto, or arises out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, which untrue
statement or alleged untrue statement or omission or alleged omission was
made therein in reliance upon and in conformity with, written information
furnished to the Company by such Holder specifically for use in
connection with the preparation thereof; and will reimburse the Company,
each such controlling person and each such underwriter for any legal or
other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or
action.
(c) Each party entitled to indemnification under this Section 5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom, provided
that counsel for the Indemnifying Party, who shall conduct the defense of
such claim or any litigation resulting therefrom, shall be approved by
the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at
such party's expense, and provided further that the failure of any
indemnified Party to give notice as provided herein shall no relieve the
Indemnifying Party of its obligations under this Section 5. No
indemnifying Party, in the defense of any such claim of litigation,
shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include
as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified Party of a release from all liability in respect to
such claim or litigation.
-5-
<PAGE> 6
6. Information by Holder. Each Holder shall furnish in writing to the
Company such information regarding such Holder as the Company may reasonably
request and as shall be reasonably required in connection with any
registration, qualification or compliance referred to in this Agreement.
7. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of
the Restricted Securities to the public without registration, the Company
agrees to:
(a) Use its best efforts to make and keep public information
available, as those terms are understood and defined in Rule 144 under
the Securities Act, at all times from and after ninety (90) days
following the effective date of the registration under the Securities Act
filed by the Company for an offering of its securities to the general
public;
(b) Use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act") at any time during which it is subject to such reporting
requirements; and
(c) So long as any Holders own any Restricted Securities, furnish to
each requesting Holder forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144
(at any time from and after ninety (90) days following the effective date
of the registration statement filed by the Company for an offering of its
securities to the general public), and of the Securities Act and the
Exchange Act (at any time during which it is subject to such reporting
requirements), a copy of the most recent annual or quarterly report of
the Company, and such other reports and documents so filed as such Holder
may reasonably request in availing itself of an) rule or regulation of
the Commission allowing such Holder to sell any such securities without
registration.
8. Transfer of Registration Rights. The right to cause the Company to
register Registrable Securities pursuant to this Agreement may be assigned by
any Holder to a transferee or assignee, provided (i) the Company is, within a
reasonable time after such transfer furnished with written notice of the name
and address of such transferee or assignee and the securities with respect to
which such registration rights are being assigned; and (ii) the transferee or
assignee agrees in writing to be bound by the provisions of this Agreement.
9. "Market Stand-Off" Agreement. Each Holder agrees, if requested by
the Company and the underwriter of Common Stock (or other securities) of the
Company, not to sell or otherwise transfer or dispose of any Common Stock (or
other securities) of the Company held by him during such period of time as may
be required by the underwriter (but no more than one hundred eighty (180) days)
following the effective date of any registration statement of the Company filed
under the Securities Act with respect to any underwritten public offering of
securities by the Company, provided that the Company's officers and directors
and a majority of other holders of securities of the Company shall also enter
into similar agreements. Such agreement shall be in writing in a form
satisfactory to the Company and such underwriter. The Company may impose
stop-transfer instructions with respect to the securities subject to the
foregoing restrictions until the end of said one hundred eighty (180) day
period.
-6-
<PAGE> 7
10. Termination of Registration Rights. The right to cause the Company to
register securities granted by the Company under this Agreement shall terminate
with respect to any Holder at such time as all of the Registrable Securities of
such Holder can be sold (in a single transaction) in accordance with Rule 144.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first above written.
CENTRUM INDUSTRIES, INC.
By: /s/ George H. Wells
-------------------
Title:
(Duly Authorized)
The foregoing Agreement is hereby agreed to as of the date thereof.
FIRST NEW ENGLAND CAPITAL MORAMERICA CAPITAL
LIMITED PARTNERSHIP CORPORATION
By: FINEC Corp., By: InvestAmerica Investment Advisors, Inc.
Its general partner Its Investment Advisor
By /s/ Richard C. Klaffky By: /s/ David Schroder
------------------------ -------------------------
Richard Klaffky David Schroder
Title: President Title: President
(Duly Authorized) (Duly Authorized)
NORTH DAKOTA SMALL BUSINESS
INVESTMENT COMPANY, A NORTH
DAKOTA LIMITED PARTNERSHIP
By: InvestAmerica, N.D. Management, Inc.
Its Investment Advisor
By: /s/ David Schroder
--------------------------------------
David Schroder
Title: President
(Duly Authorized)
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<PAGE> 1
EXHIBIT 10.9
LOAN AND SECURITY AGREEMENT
dated as of
February 19, 1996
BETWEEN
THE HUNTINGTON NATIONAL BANK, as Lender
AND
McINNES STEEL COMPANY,
EBALLOY GLASS PRODUCTS COMPANY,
ERIE BRONZE & ALUMINUM COMPANY, AND
McINNES INTERNATIONAL, INC., as Borrowers
AND
CENTRUM INDUSTRIES, INC.
MCINNES SERVICES, INC. as Guarantors
Porter, Wright, Morris & Arthur
41 South High Street
Columbus, Ohio 43215
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
1. Extensions of Credit . . . . . . . . . . . . . . . . . . . . 5
1.1 The Loans . . . . . . . . . . . . . . . . . . . . . . . . 5
1.2 Borrowing Base . . . . . . . . . . . . . . . . . . . . . . 5
1.3 Letter of Credit . . . . . . . . . . . . . . . . . . . . . 6
1.4 Pending Defaults . . . . . . . . . . . . . . . . . . . . . 6
2. Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1 Eligible Accounts . . . . . . . . . . . . . . . . . . . . 6
2.2 Eligible Raw Materials Inventory . . . . . . . . . . . . . 7
2.3 Eligible Material Content of WIP Inventory . . . . . . . . 7
2.4 Eligible Inventory . . . . . . . . . . . . . . . . . . . . 7
2.5 Eligible Equipment . . . . . . . . . . . . . . . . . . . . 8
2.6 Reserves . . . . . . . . . . . . . . . . . . . . . . . . . 8
3. Terms and Uses of Loan. . . . . . . . . . . . . . . . . . . . . 8
3.1 Interest Rates and Fees . . . . . . . . . . . . . . . . . . 8
3.2 Terms and Advances . . . . . . . . . . . . . . . . . . . . 9
3.3 Costs and Expenses . . . . . . . . . . . . . . . . . . . . 9
3.4 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . 9
3.5 Early Termination Fee . . . . . . . . . . . . . . . . . . 9
3.6 The Guarantors and Guarantor Collateral . . . . . . . . . 10
3.7 Other Collateral Securing the Loans . . . . . . . . . . . 10
3.8 Increased Capital . . . . . . . . . . . . . . . . . . . . 10
4. Security Agreement . . . . . . . . . . . . . . . . . . . . . . 11
4.1 Grant of Security Interest . . . . . . . . . . . . . . . . 11
4.2 Representations and Covenants Regarding the Collateral . . 12
4.3 Lockbox and Collection of Accounts . . . . . . . . . . . . 12
4.4 Cash Collection Account . . . . . . . . . . . . . . . . . 13
4.5 Application of Proceeds from Collection of Accounts; Setoff;
Government Accounts; Perfection; Lien Notation . . . . . . 13
4.6 Collateral Insurance . . . . . . . . . . . . . . . . . . . 14
4.7 Books and Records . . . . . . . . . . . . . . . . . . . . 14
4.8 Collateral Administration and Warranties Regarding the
Inventory and the Accounts . . . . . . . . . . . . . . . 14
4.9 Preservation and Disposition of Collateral . . . . . . . . 15
4.10 Extensions and Compromises . . . . . . . . . . . . . . . . 16
4.11 Financing Statements . . . . . . . . . . . . . . . . . . . 16
4.12 Bank's Appointment as Attorney-in-Fact . . . . . . . . . . 16
4.13 Remedies on Default . . . . . . . . . . . . . . . . . . . 17
5. Warranties and Representations . . . . . . . . . . . . . . . . 18
5.1 Corporate Organization and Authority . . . . . . . . . . . . 18
5.2 Borrowing is Legal and Authorized . . . . . . . . . . . . 18
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
5.3 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.4 Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.5 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.6 Financial Statements; Full Disclosure . . . . . . . . . . . . . . . . 19
5.7 Financial Projections . . . . . . . . . . . . . . . . . . . . . . . . 19
5.8 Litigation; Adverse Effects . . . . . . . . . . . . . . . . . . . . . 19
5.9 No Insolvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.10 Government Consent . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.11 Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.12 No Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.13 ERISA Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.14 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.15 Environmental Protection . . . . . . . . . . . . . . . . . . . . . . . 22
5.16 Warranties and Representations . . . . . . . . . . . . . . . . . . . . 23
6. Borrower Business Covenants . . . . . . . . . . . . . . . . . . . . . . . 23
6.1 Payment of Taxes and Claims . . . . . . . . . . . . . . . . . . . . 23
6.2 Maintenance of Properties and Corporate Existence . . . . . . . . . 24
6.3 Sale of Assets, Merger, Subsidiaries, Tradenames and Conduct
of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.4 Negative Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.5 Other Borrowings and Contingent Liabilities . . . . . . . . . . . . 25
6.6 Sale of Accounts; No Consignment . . . . . . . . . . . . . . . . . . 25
6.7 Minimum Security . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.8 Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.9 Acquisition of Capital Stock . . . . . . . . . . . . . . . . . . . . 26
6.10 Trade Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . 26
6.11 Compensation of Officers and Affiliated Persons . . . . . . . . . . 26
6.12 Cash Dividends and Other Distributions . . . . . . . . . . . . . . . 26
6.13 Transactions With Affiliates . . . . . . . . . . . . . . . . . . . . 26
6.14 Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.15 Ratio of Total Liabilities to Tangible Net Worth . . . . . . . . . . 27
6.16 Fixed Charge Coverage Ratio . . . . . . . . . . . . . . . . . . . . 28
6.17 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . 29
6.18 Loans and Advances . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.19 Operating Lease Rentals . . . . . . . . . . . . . . . . . . . . . . 29
6.20 Environmental Compliance and Indemnification . . . . . . . . . . . . 29
6.21 Maintenance of Accounts . . . . . . . . . . . . . . . . . . . . . . 30
6.22 Accounts Payable Turnover Days . . . . . . . . . . . . . . . . . . . 30
6.23 Accounts Receivable Turnover Days . . . . . . . . . . . . . . . . . . 30
6.24 Inventory Turnover Days . . . . . . . . . . . . . . . . . . . . . . 30
6.25 Expense Reduction . . . . . . . . . . . . . . . . . . . . . . . . . 30
7. Financial Information and Reporting . . . . . . . . . . . . . . . . . . . 30
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
8. Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.2 Default Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.2 Access to Accountants . . . . . . . . . . . . . . . . . . . . . . . . 35
9.3 Reproduction of Documents . . . . . . . . . . . . . . . . . . . . . . 35
9.4 Survival; Successors and Assigns . . . . . . . . . . . . . . . . . . . 35
9.5 Amendment and Waiver, Duplicate Originals . . . . . . . . . . . . . . 36
9.6 Uniform Commercial Code and Generally Accepted Accounting Principles. . 36
9.7 Enforceability and Governing Law . . . . . . . . . . . . . . . . . . . 36
9.8 Waiver of Right to Trial by Jury . . . . . . . . . . . . . . . . . . . 37
9.9 Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.10 No Consequential Damages . . . . . . . . . . . . . . . . . . . . . . . 37
9.11 Conditions Precedent to the Loans . . . . . . . . . . . . . . . . . . 37
9.12 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.13 Conditions Precedent to Subsequent Money Advances . . . . . . . . . . 38
10. Index of Definitions . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
Exhibits
Exhibit A- 1 -Revolving Note
Exhibit A-2 - Term Note
Exhibit A- 3 - Letter of Credit Reimbursement Agreement
Exhibit B - Schedule of Permitted Encumbrances
Exhibit C - Schedule of Business Locations
Exhibit D - Conditions Precedent to Initial Disbursement
Schedule 2.5 - Levy Equipment Appraisal and Valuation Letter
Schedule 5.3 - Tax Disclosure
Schedule 5.4 - Capital Structure
Schedule 5.8 - Litigation Disclosure
Schedule 5.13 - ERISA Disclosure
Schedule 5.14 - Labor Disclosure
Schedule 5.15 - Environmental Disclosure
Schedule 6.3 - Schedule of Tradenames
Schedule 6.5 - Permitted Borrowings of Borrowers and Guarantors
Schedule 6.11 - Compensation Schedule
Schedule 6.19 - Operating Lease Schedule
Schedule 6.20 - Environmental Compliance
Schedule 6.21 - Schedule of Payroll Accounts
Schedule 8.1 (i) - Individual Noteholders
<PAGE> 5
LOAN AND SECURITY AGREEMENT
This agreement (this "Agreement") is entered into at Columbus, Ohio, between
and among The Huntington National Bank (the "Bank") as lender, McInnes Steel
Company ("MSC"), Eballoy Glass Products Company ("Eballoy"), Erie Bronze &
Aluminum Company ("EBA"), and McInnes International, Inc., as borrowers (the
foregoing shall be referred to herein collectively as "Borrowers" and
separately as a "Borrower"), and Centrum Industries, Inc. ("Centrum") and
McInnes Services, Inc. ("MSI"), as guarantors (collectively the "Guarantors"
and separately a "Guarantor") as of the 29th day of February, 1996. The
Borrowers and the Guarantors shall also be referred to herein collectively as
the "Companies" and separately as a "Company."
1. Extensions of Credit.
1.1 The Loans. The Bank, subject to the terms and conditions hereof, will
make loans and advances and extend credit to the Borrowers up to the aggregate
sum of the principal sum of loans plus the stated value of letters of credit of
$18,350,000.00 (collectively the "Loans"). Subject to the terms and conditions
hereof, the Loans shall be comprised of (a) revolving loans and advances to the
Borrowers, which shall not exceed the aggregate principal sum of $15,500,000.00
(collectively the "Revolving Loans" and individually a "Revolving Loan"), (b) a
direct pay letter of credit up to the maximum stated value of $4,500,000.00
plus accrued interest of $110,959.00 for the account of MSC (the "Letter of
Credit"), and (c) a term loan facility to MSC up to the principal sum of
$2,850,000.00 (the "Term Loan"); provided, however, that notwithstanding the
individual limitations set forth above with respect to the Revolving Loans and
the Letter of Credit, the aggregate principal balance of the Revolving Loans,
plus the stated value outstanding of the Letter of Credit shall not exceed the
sum of $15,500,000.00.
1.2 Borrowing Base. The principal balance of the Revolving Loans made to any
Borrower, plus the aggregate stated value outstanding at any time of Letter of
Credit issued for such Borrower, shall not exceed such Borrower's Borrowing
Base. "Borrowing Base" shall mean, with respect to any Borrower, the sum of the
following with respect to such Borrower (a) the lesser of 70% of Eligible Raw
Materials Inventory or $3,500,000.00; plus (b) the lesser of 60% of Eligible
Material Content of WIP Inventory or $1,500,000.00, plus (c) the Eligible
Equipment Availability, plus (d) 85% of Eligible Accounts (collectively the
"Borrowing Base"). The Bank, in its sole good faith discretion, reserves the
right upon notice to the Borrowers to increase or decrease the foregoing
percentages or the maximum dollar amount attributable to any category of
Eligible Inventory. "Eligible Equipment Availability" shall mean with respect
to Eligible Equipment the following amounts with respect to the following
periods:
(i) from the date of this Agreement through and including December 30, 1996,
with respect to MSC, the sum of $3,700,000, with respect to EBA, the sum
of $767,000, and with respect to Eballoy, the sum of $283,000,
(ii) beginning December 31, 1996, and continuing through and including
December 30, 1997, with respect to MSC, the sum of $3,083,333, with
respect to EBA, the sum of $586,500, and with respect to Eballoy, the
sum of $235,833,
<PAGE> 6
(iii) beginning December 31, 1997, and continuing through and including
December 30, 1998, and with respect to MSC, the sum of $2,466,667,
with respect to EBA, the sum of $406,000, with respect to Eballoy, the
sum of $188,667, and
(iv) beginning December 31, 1998, and continuing at all times thereafter,
with respect to MSC, the sum of $ 1,850,000, with respect to EBA, the
sum of $225,500, and with respect to Eballoy, the sum of $141,500,
minus with respect to each applicable period the appraised value of any
Equipment that is sold, transferred or disposed of pursuant to the terms of
this Agreement or becomes obsolete after December 27, 1995.
1.3 Letter of Credit. The terms and conditions of the Letter of Credit shall
be as set forth in the Reimbursement Agreement dated of even date herewith (the
"Reimbursement Agreement"), and attached as Exhibit A-3 hereto, and any
amendment, modification or supplement thereto.
1.4 Pending Defaults. The Bank shall have no obligation to advance or
readvance any sums pursuant to the Loans at any time when a set of facts or
circumstances exists, which, by themselves, upon the giving of notice, the
lapse of time, or any one or more of the foregoing would constitute an Event of
Default under this Agreement (a "Pending Default").
2. Eligibility.
2.1 Eligible Accounts. The term "Eligible Accounts" means with respect to any
Borrower the portion of such Borrower's accounts that the Bank determines from
time to time in good faith, based on credit policies, market conditions, such
Borrower's business and other criteria, is eligible for use in calculating the
Borrowing Base. Without limiting the Bank's right to determine which accounts
are Eligible Accounts, no account will be an Eligible Account in calculating
the Borrowing Base, unless, at a minimum, such account is unconditionally due
and owing to such Borrower from a party (the "Account Debtor") that meets the
qualifications stated herein, conforms to the warranties regarding the Accounts
contained in this Agreement, and meets all the following requirements until it
is collected in full: (a) the account is due and payable (in U.S. dollars),
exclusive of sales or other taxes, and not more than 90 days have elapsed from
the original invoice therefor, or if a special dating program has been approved
in writing by the Bank, the account is due and payable on a date permitted by
the terms of such dating program and is not past-due; (b) the account arises
from the completed performance of a sale of goods and/or related services, does
not constitute a progress billing or advance billing, and, if involving a sale
of goods, all such goods have been lawfully shipped and invoiced to the Account
Debtor, and if requested by the Bank, copies of all invoices, together with all
shipping documents and delivery receipts evidencing such shipment have been
delivered to the Bank; (c) the account does not arise from a contract with any
government or agency thereof; (d) the account is not subject to any prior
assignment, claim, lien, security interest, or subject to any levy or setoff;
(e) the account is not subject to any credit, contra account, allowance,
adjustment, return of goods, or discount (collectively a "Contra"), provided,
however, that unless the Account Debtor has asserted a Contra, if the amount of
the account exceeds the amount of the Contra, such excess shall be considered
for eligibility if such excess meets all other requirements
<PAGE> 7
of this Section 2.1; (f) the account does not arise from an Affiliate; (g) the
account arises from an Account Debtor other than General Electric Company
("GE") or Westinghouse Electric Company ("Westinghouse"), and does not, when
added to all other accounts of the Account Debtor with all of the Borrowers,
produce an aggregate indebtedness from the Account Debtor of more than 20% of
the total of all the Borrowers' Eligible Accounts, or, the account arises from
GE or Westinghouse and does not, when added to all other accounts of GE or
Westinghouse with all of the Borrowers, produce an aggregate indebtedness from
such Account Debtor of more than 25% of the total of all the Borrowers'
Eligible Accounts; (h) the Account Debtor is not subject to bankruptcy,
receivership or similar proceedings, is not insolvent and the Bank is not aware
that such Account Debtor is in default of any material obligations or has
suffered a Material Adverse Effect; (i) the account is not evidenced by any
chattel paper, promissory note, payment instrument or written agreement and
does not arise from a consumer transaction; (j) the account does not arise from
an Account Debtor whose mailing address or executive office is located outside
the United States or Canada (unless the payment for the goods which give rise
to such account is assured by an irrevocable letter of credit received by such
Borrower, such letter of credit is from a financial institution acceptable to
the Bank, the same has been assigned to the Bank and the original has been
delivered to the Bank, or the same has been confirmed by a financial
institution acceptable to the Bank and is in form and substance acceptable to
the Bank, payable in the full amount of the account in United States dollars at
a place of payment located within the United States); (k) the account does not
arise from an Account Debtor to whom goods are shipped on a "cash on delivery"
or C.O.D. basis; (1) the account does not arise from an Account Debtor, having
20% or more of its accounts with all of the Borrowers (in dollar value) not
Eligible Accounts pursuant to this Section 2.1; and (m) the Bank has not
notified the Borrower that the account or the Account Debtor is unsatisfactory
or unacceptable (although the Bank reserves the right to do so in its sole good
faith discretion at any time).
2.2 Eligible Raw Materials Inventory. The term "Eligible Raw Materials
Inventory," with respect to any Borrower, means that portion of such Borrower's
Eligible Inventory consisting of Raw Materials Inventory, as set forth in such
Borrower's general ledger account, which shall be determined in the same manner
as on the date of this Agreement, and shall be valued at the lesser of cost (on
a FIFO basis) or market.
2.3 Eligible Material Content of WIP Inventory. The term "Eligible Material
Content of WIP Inventory," with respect to any Borrower, means that portion of
such Borrower's Eligible Inventory consisting of Work-ln-Process -- Materials,
as set forth in such Borrower's general ledger account, which shall be
determined in the same manner as on the date of this Agreement, and shall be
valued at the lesser of cost (on a FIFO basis) or market. The terms Eligible
Raw Materials Inventory and Eligible Material Content of WIP Inventory shall be
mutually exclusive.
2.4 Eligible Inventory. The term "Eligible Inventory", with respect to any
Borrower, means that portion of such Borrower's inventory that the Bank
determines in good faith from time to time, based on credit policies, market
conditions, such Borrower's business and other matters, is eligible for use in
calculating the Borrowing Base. For purposes of determining the Borrowing Base,
Eligible Inventory (unless the Bank agrees otherwise in writing) shall not
include work in
<PAGE> 8
process (except to the extent of Eligible Material Content of WIP Inventory
only), slow-moving, obsolete or discontinued inventory, supply items,
packaging, or the freight portion of raw materials, inventory in the control of
a third person for processing, storage or any other reason (unless such
Borrower shall have provided to the Bank a processor's waiver or bailee's
waiver in form satisfactory to the Bank), consigned inventory, or inventory in
transit.
2.5 Eligible Equipment. The term "Eligible Equipment" means that portion of
the following Borrowers' equipment that is listed in a certain appraisal by
Norman Levy Associates, Inc., dated December 27, 1995 (the "Levy Appraisal"),
and used solely in connection with the operations of MSC, EBA, or Eballoy,
except for and excluding all equipment located at or used in connection with
MSC's Rolled Ring Division in Erie, Pennsylvania (the "Rolled Ring Division
Equipment"), that the Bank determines in good faith from time to time based
upon credit policies, market conditions, and other matters, is eligible. For
such purpose, no equipment shall be Eligible Equipment unless, at a minimum,
(a) such item of equipment is owned solely by MSC, EBA, or Eballoy and is not
Rolled Ring Division Equipment, (b) the Bank has a first and exclusive
perfected security interest with respect to such item of equipment, (c) the
Bank is lender loss payee with respect to such equipment, (d) if such item of
equipment is located on property not owned by a Borrower, such Borrower has
obtained a landlord's waiver and mortgagee's waiver, if applicable, or a
bailee's waiver with respect to such equipment, and (e) such equipment is
currently used in the operation of such Borrower's business. Each Borrower's
equipment shall be valued consistent with the method of valuation described in
a certain letter from Norman Levy Associates, Inc. to George H. Wells of
Centrum Industries dated December 27, 1995, attached hereto as a portion of
Schedule 2.5 or as reflected in a more recent appraisal satisfactory to the
Bank in all respects, in its sole and absolute good faith discretion, by an
appraiser approved by the Bank.
2.6 Reserves. The Bank reserves the right to deduct from any advances to be
made hereunder such amounts as the Bank may deem proper and necessary, in its
sole good faith discretion, to establish reserves for the creditworthiness of
the Account Debtors, market fluctuations in the value of inventory, the payment
of taxes or contingent liabilities, customer advances and deposits, payment of
interest, fees, and expenses payable under this Agreement or any other
agreement in favor of the Bank, and such other purposes as the Bank may deem
appropriate. In addition, from the date of this Agreement through and including
the funding of a certain loan from the Pennsylvania Industrial Development
Authority in an amount not less than $525,000.00 (the "PIDA Loan"), the Bank
shall maintain a specific reserve of $200,000.00, and thereafter through and
including the later of December 31, 1996, or until such time after the date
hereof that MSC has paid not less than the principal sum of $700,000 of those
certain Erie County Industrial Development Authority Variable Rate Demand
Revenue Bonds, Series of 1991 (the "IRB"), the Bank shall maintain a specific
reserve for such principal payment of $700,000. Such reserve shall be released
after the time set forth in the immediately preceding sentence provided that no
Event of Default has occurred hereunder.
3. Terms and Uses of Loan.
3.1 Interest Rates and Fees. The Borrowers jointly and severally agree to pay
the Bank (a) each month interest on the unpaid balance of the Loans at the
rates of interest set forth in the
<PAGE> 9
note or notes evidencing the Loans; (b) beginning with the date of this
Agreement and continuing on the first of each month thereafter a collateral
administration fee in respect of the Revolving Loans equal to $3,000.00; (c) no
later than the execution of this Agreement, and on each anniversary date of
this Agreement, an annual facility fee equal to $60,000.00; and (d) beginning
on the date of this Agreement and continuing on each July 1, October 1, and
January 1 and April 1 thereafter the fees set in the Reimbursement Agreement a
equal to 3% per annum of the stated amount of the Letter of Credit.
3.2 Terms and Advances. The Loans shall be evidenced by a note or by one or
more notes or reimbursement agreements subsequently executed in substitution
therefor, each in substantially the form set forth in Exhibit A-1, A-2 and A-3
attached hereto. Repayment of the Loans shall be made in accordance with the
terms of the promissory notes or reimbursement agreement then outstanding
pursuant to this Agreement.
3.3 Costs and Expenses. The Borrowers jointly and severally agree to pay
service charges, analysis fees, audit fees in the amount of $500.00 per day per
auditor for each audit conducted by the Bank, plus out-of-pocket expenses,
provided, however, in the absence of the occurrence of an Event of Default
hereunder, such audits will not exceed four audits per calendar year, and all
costs and expenses incidental to or in connection with the Loans or any service
provided by the Bank, the enforcement of the Bank's rights in connection
therewith, any amendment or modification of this Agreement or any other loan
documents, any sale or attempted sale of any interest herein to a participant
or co-lender, any litigation, contest, dispute, proceeding or action in any way
relating to the Collateral or to this Agreement, whether any of the foregoing
are incurred prior to or after maturity, the occurrence of an Event of Default,
or the rendering of a judgment. Such costs shall include, but not be limited
to, fees and out-of-pocket expenses of the Bank's counsel, recording fees,
inspection fees, revenue stamps and note and mortgage taxes.
3.4 Use of Proceeds. The net proceeds of the Loans will be used to pay in
full all of the Borrowers' existing bank indebtedness, to provide for working
capital requirements of the Borrowers and for any other business purpose in the
Borrowers' businesses. In addition, the proceeds of the loan may be used to
satisfy certain obligations of MSC incurred in collection with a certain
Agreement and Plan of Reorganization by and among Centrum, Centrum Merging
Corporation, and MSC, dated December 5, 1995 (the "Transactions").
3.5 Early Termination Fee. The Borrowers jointly and severally agree to pay
to the Bank an early termination fee of $370,000.00 if the Borrowers terminate
or prepay in full the Loans prior to the Maturity Date; provided, however, that
if the Borrowers terminate or prepay in full the Loans within the two years
immediately preceding the Maturity Date, such early termination fee shall be
$185,000.00. "Maturity Date" shall mean February 28, 1999, or any extended
maturity date of the Revolving Loans, as the same may be extended from time to
time by the Bank, in its sole and absolute discretion. The Borrowers further
agree that any early termination fee set forth in this Section 3.5 shall be due
and payable to the Bank regardless of whether such prepayment results from the
Borrowers' voluntary prepayment or from the Bank's exercise of any of its
rights after an Event of Default hereunder; provided, however, that if the
Loans are paid in full solely as a result of insurance proceeds resulting from
the damage, destruction, or
<PAGE> 10
condemnation of the Collateral, the Real Estate Collateral, the Guarantor
Collateral, the Non-Recourse Guarantor Collateral, or the Other Collateral,
then the Bank agrees that the above early termination fee shall be zero.
3.6 The Guarantors and Guarantor Collateral. Each of the Guarantors shall
unconditionally guarantee the full and prompt payment of the Loans, shall
evidence its obligation by executing and delivering to the Bank a Continuing
Guaranty Unlimited (the "Guaranties") (the guaranty agreement of Centrum shall
include, inter alia, a requirement that such Guarantor will maintain Tangible
Net Worth in accordance with the provisions of Section 6.14 below), and shall
secure its obligations under each of the Guaranties with a first and exclusive
security interest, assignment, pledge, and mortgage on all of its stock or
securities (except for the stock of Micafil, Inc.), business assets, motor
vehicles, and real estate, whether now owned or hereafter acquired pursuant to
security agreements, assignments, pledges, and mortgages in form satisfactory
to the Bank (the "Guarantor Collateral"). In addition, Micafil, Inc., and
American Handling, Inc. shall each, on a non-recourse basis, guaranty the
Loans, shall evidence its obligations by executing and delivering to the Bank a
Non-Recourse Guaranty (the "Non-Recourse Guaranties"), and shall secure the
obligations under the Non-Recourse Guaranties, with a first and exclusive
security interest, assignment, pledge, and mortgage on all of their respective
business assets, motor vehicles and real estate, whether now owned or hereafter
acquired pursuant to security agreements, pledges, and mortgages in form
satisfactory to the Bank subject to any liens or encumbrances permitted by the
terms of such documents (the "Non-Recourse Guarantor Collateral "), provided,
however, that if the Bank, in its sole discretion, does not provide a credit
facility in the amount of $250,000.00 to Micafil, Inc., then the Bank agrees to
subordinate its security interests with respect to the business assets of
Micafil, Inc. to the extent of $250,000.00 in favor of another senior lender.
3.7 Other Collateral Securing the Loans. In addition to the Collateral (as
defined below), the Loans shall be secured by first and exclusive open-end
mortgages, assignments of rents and security agreements in all of the real
property interests whether now owned or hereafter acquired, whether owned or
leased of the Borrowers (the "Real Estate Collateral"); provided, however, that
the Bank's mortgage interests in the Borrowers' real estate interests shall be
subject to the liens and encumbrances set forth in Exhibit B attached hereto,
(b) a first and exclusive security interest in all of the Borrowers' motor
vehicles and interests in capital stock; and (c) the life insurance referred to
in Section 6.2 below (collectively the "Other Collateral").
3.8 Increased Capital. If after the date hereof the Bank determines that (i)
the adoption or implementation of or any change in or in the interpretation or
administration of any law or regulation or any guideline or request from any
central bank or other governmental authority or quasi-governmental authority
exercising jurisdiction, power or control over the Bank or banks or financial
institutions generally (whether or not having the force of law), compliance
with which affects or would affect the amount of capital required or expected
to be maintained by the Bank or any corporation controlling the Bank and (ii)
the amount of such capital is increased by or based upon (A) the making or
maintenance by the Bank of its Loans, any participation in or obligation to
participate in the Loans, Letter of Credit or other advances made hereunder or
the existence of any obligation to make the Loans or (B) the issuance or
maintenance by the Bank of, or the existence of the Bank's obligation to issue,
Letter of Credit, then, in any such case,
<PAGE> 11
upon written demand by the Bank, the Borrower shall immediately pay to the
Bank, from time to time as specified by the Bank, additional amounts sufficient
to compensate the Bank or such corporation therefor. Such demand shall be
accompanied by a statement as to the amount of such compensation and include a
summary of the basis for such demand with detailed calculations. Such statement
shall be conclusive and binding for all purposes, absent manifest error.
4. Security Agreement.
4.1 Grant of Security Interest. Each of the Borrowers hereby grants, pledges,
conveys and assigns to the Bank continuing security interests in the following
property, whether such Borrower's interest therein be as owner, co-owner,
lessee, consignee, secured party or otherwise, and whether the same be now
owned or existing or hereafter arising or acquired, and wherever located,
together with all substitutions, replacements, additions and accessions
therefor or thereto, all documents, negotiable documents, documents of title,
warehouse receipts, storage receipts, dock receipts, dock warrants, express
bills, freight bills, airbills, bills of lading, and other documents relating
thereto, all products thereof and all cash and non-cash proceeds thereof
including, but not limited to, notes, drafts, checks, instruments, insurance
proceeds, indemnity proceeds, warranty and guaranty proceeds (herein the
"Proceeds"): (a) all inventory including, but not limited to, all goods,
merchandise and other personal property furnished under any contract of service
or intended for sale or lease, all parts, supplies, raw materials, work in
process, finished goods, materials used or consumed, and repossessed and
returned goods (herein the "Inventory"); (b) all accounts, accounts receivable,
contract rights, chattel paper, general intangibles, income or other tax
refunds, preference recoveries and all claims in respect of any transfers of
any kind, instruments, negotiable documents, notes, drafts, acceptances and
other forms of obligations, all books, records, ledger cards, computer
programs, computer software, and other documents or property, including without
limitation such items which are evidencing or relating to the accounts and
inventory and including, but not limited to, any of the foregoing arising from
or in connection with the sale, lease or other disposition of Inventory (herein
the "Accounts"); (c) all machinery, equipment, tools, dies, molds, rolling
stock, furniture, furnishings and fixtures including, but not limited to, all
manufacturing, fabricating, processing, transporting and packaging equipment,
power systems, heating, cooling and ventilating systems, lighting and
communications systems, electric, gas and water distribution systems, food
service systems, fire prevention, alarm and security systems, laundry systems
and computing and data processing systems (herein the "Equipment"); (d) all
trade names, trademarks, trade secrets, service marks, data bases, software and
software systems, including the source and object codes, information systems,
discs, tapes, customer lists, telephone numbers, credit memoranda, goodwill,
patents, patent applications, patents pending, copyrights, royalties, literary
rights, licenses and franchises (herein the "Intellectual Property"); and (e)
all deposit accounts, whether general, special, time, demand, provisional, or
final, all cash or monies wherever located, any and all deposits or other sums
at any time credited by or due, any and all policies, certificates of
insurance, securities, goods, choses in action, cash and property, which now or
hereafter are at any time in the possession or control of the Bank or in
transit by mail or carrier to or from the Bank, or in the possession of any
third party acting in the Bank's behalf, without regard to whether the Bank
received the same in pledge for safekeeping, as agent for collection or
transmission or otherwise, or whether the Bank has conditionally released the
same (herein the
<PAGE> 12
"Deposits") (all of the Accounts, the Inventory, the Equipment, the
Intellectual Property, the Deposits and the Proceeds herein are collectively
termed the "Collateral").
The security interests hereby granted are to secure the prompt and full
payment and complete performance of all Obligations to the Bank. The word
"Obligations" means all indebtedness, debts and liabilities (including
principal, interest, late charges, collection costs, attorneys' fees and the
like) of each of the Borrowers to the Bank, whether now existing or hereafter
arising, either created by any of the Borrowers alone or together with another
or others, primary or secondary, secured or unsecured, absolute or contingent,
liquidated or unliquidated, direct or indirect, whether evidenced by note,
draft, application for letter of credit or otherwise, and any and all renewals
of or substitutes therefor, including all indebtedness owed to the Bank in
connection with the Loans.
The continuing security interests granted hereby shall extend to all present
and future Obligations, whether or not the Obligations are reduced or
extinguished and thereafter increased or reincurred, whether or not the
Obligations are related to the indebtedness identified above by class, type or
kind and whether or not the Obligations are specifically contemplated as of the
date hereof. The absence of any reference to this Agreement in any documents,
instruments or agreements evidencing or relating to any Obligation secured
hereby shall not limit or be construed to limit the scope or applicability of
this Agreement.
4.2 Representations and Covenants Regarding the Collateral. Each of the
Borrowers represents, warrants and covenants as follows: such Borrower (a)
except for the security interests granted hereby, any liens set forth in
Exhibit B, and liens permitted by this Agreement, is, or as to Collateral
arising or to be acquired after the date hereof, shall be, the sole and
exclusive owner of the Collateral, and the Collateral is and shall remain free
from any and all liens, security interests, encumbrances, claims and interests,
and no security agreement, financing statement, equivalent security or lien
instrument or continuation statement covering any of the Collateral is on file
or of record in any public office; (b) shall not create, permit or suffer to
exist, and shall take such action as is necessary to remove, any claim to or
interest in or lien or encumbrance upon the Collateral except the security
interest granted hereby and any liens or encumbrances set forth in Exhibit B,
and shall defend the right, title and interest of the Bank in and to the
Collateral against all claims and demands of all persons and entities at any
time claiming the same or any interest therein; (c) shall maintain its
principal place of business and chief executive office at the address set forth
in paragraph 9.1 of this Agreement, and the records concerning the Collateral
shall be kept at that address unless the Bank shall give its prior written
consent otherwise; (d) shall keep the Collateral at the locations set forth in
Exhibit C attached hereto and maintain no other place of business or place
where Collateral is located, except as shown in Exhibit C attached hereto; (e)
shall deliver to the Bank at least thirty (30) days prior to the occurrence of
any of the following events, written notice of such impending events: (i) a
change in the principal place of business or chief executive office; (ii) the
opening or closing of any place of business; or (iii) a change in name,
identity or corporate structure.
4.3 Lockbox and Collection of Accounts. Each of the Borrowers shall cause all
of its accounts to be collected through a lockbox arrangement with the Bank and
shall execute a lockbox agreement in form and substance satisfactory to the
Bank. Within 5 days after the date
<PAGE> 13
of this Agreement, each Borrower shall notify all existing Account Debtors to
remit payments to the address specified in such lockbox agreement, and all
invoices rendered after the date hereof shall bear such address. The Bank at
any time after the occurrence of an Event of Default may notify Account Debtors
on any Collateral that the Collateral has been assigned to the Bank and shall
be paid to the Bank through the lockbox or otherwise. Upon request of the Bank
at any time after the occurrence of an Event of Default the Borrowers agree to
notify such Account Debtors and indicate on all billings that the accounts are
payable to the Bank.
4.4 Cash Collection Account. The collections through the lockbox arrangement
shall be deposited into cash collection accounts maintained with the Bank (the
"Cash Collection Account"), over which the Bank alone shall have the power of
withdrawal. If any of the Borrowers makes collections on any of the Collateral,
it shall hold in trust for the Bank the proceeds received from collections, and
turn over all checks, drafts, cash and other remittances and proceeds to the
Bank each business day in the exact form in which they are received, together
with a collection report in form acceptable to the Bank. Said proceeds shall be
deposited in the Cash Collection Accounts. Prior to the occurrence of an Event
of Default, the Bank shall apply the whole or any part of the collected funds
on deposit in the Cash Collection Accounts against the principal and/or
interest of the Revolving Loans, and after the occurrence of an Event of
Default, the Bank may apply such funds to the Term Loan or any other
indebtedness or Obligations, and any portion of said funds on deposit in the
Cash Collection Accounts which the Bank elects not to apply to the Obligations
may be paid over and deposited by Bank to the Borrowers' commercial accounts.
The Bank, at the Bank's sole discretion, may credit amounts deposited in the
Cash Collection Accounts to the Loans on the day of deposit. To compensate the
Bank for this arrangement, the Bank charges, and each of the Borrowers agrees
to pay a fee which is calculated in accordance with the Bank's standard
practices and procedures as if the deposits in the Cash Collection Accounts
were not applied to the Revolving Loan until one business day after deposit in
the Cash Collection Accounts, with interest charged on the daily deposits in
the Cash Collection Account at the interest rates applicable to the Revolving
Loan. Such amount is charged to the Borrowers monthly.
4.5 Application of Proceeds from Collection of Accounts; Setoff; Government
Accounts; Perfection; Lien Notation. All amounts received by the Bank
representing payment of Accounts or proceeds from the sale of Inventory or of
the Collateral shall be applied by the Bank prior to the occurrence of an Event
of Default to the Revolving Loans, and after any Event of Default to the
payment of the Obligations in such order of preference as the Bank may
determine. Each of the Borrowers also authorizes the Bank at any time after the
occurrence of an Event of Default without notice, to appropriate and apply any
balances, credits, deposits, accounts or money of such Borrower in the Bank's
possession, custody or control to the payment of any of the Obligations whether
or not the Obligations are due or matured. If any of the Accounts arise out of
contracts with or orders from the United States or any department, agency or
instrumentality thereof, such Borrower shall immediately (i) notify the Bank
thereof in writing and (ii) execute any instrument and take any steps which the
Bank deems necessary pursuant to the Federal Assignment of Claims Act of 1940,
as amended (41 U.S.C. Section 15) in order that all money due and to become due
under such contract or order shall be assigned to the Bank. Each of the
Borrowers agrees to execute, deliver, file and record all such notices,
affidavits, assignments, financing statements and other instruments as shall in
the judgment of the Bank be
<PAGE> 14
necessary or desirable to evidence, validate and perfect the security interest
of the Bank in the Accounts. If certificates of title are issued or outstanding
with respect to any Inventory or Equipment, such Borrower will cause the
interest of the Bank to be properly noted thereon at the Borrowers' expense.
4.6 Collateral Insurance. Each of the Borrowers shall have and maintain
insurance at all times with respect to all Inventory and Equipment insuring
against risks of fire (including so-called extended coverage), explosion,
theft, sprinkler leakage and such other casualties as the Bank may designate,
containing such terms, in such form, for such amounts, for such periods and
written by such companies as may be satisfactory to the Bank, and each such
policy shall contain a clause or endorsement satisfactory to the Bank that
names the Bank as additional insured and loss payee, as its interests may
appear, and that provides that no act, default or breach of warranty or
condition of the insured or any other person shall affect the right of the Bank
to recover under such policy or policies of insurance or to pay any premium in
whole or in part relating thereto. All policies of insurance shall provide for
thirty (30) days' written minimum notice of cancellation or alteration to the
Bank. The Borrowers shall deliver to the Bank certified copies of all policies
of insurance and evidence of the payment of all premiums therefor. Each of the
Borrowers hereby irrevocably appoints the Bank (and any of the Bank's officers,
employees or agents designated by the Bank) as attorney-in-fact in obtaining
and cancelling such insurance and in making, settling and adjusting all claims
under such policies of insurance, endorsing any check, draft, instrument or
other item of payment for the proceeds of such policies of insurance and for
making all determinations and decisions with respect to such policies of
insurance. In the event of failure to provide insurance as herein provided, the
Bank may, at its option, provide such insurance, and the Borrowers shall pay to
the Bank, upon demand, the cost thereof. Should said sum not be paid to the
Bank upon demand, interest shall accrue thereon from the date of demand until
paid in full at the highest rate set forth in any document or instrument
evidencing any of the Obligations.
4.7 Books and Records. Each Borrower shall at all times keep accurate and
complete records of the Collateral, including without limitation, a perpetual
inventory with respect to raw materials and, beginning as of June 30, 1996, a
perpetual inventory with respect to work-in-process inventory, and complete and
accurate stock records, and at all reasonable times and from time to time,
shall allow the Bank, by or through any of its officers, agents, attorneys or
accountants, to examine, inspect and make extracts from such books and records
and to arrange for verification of the Collateral directly with Account Debtors
or by other methods and to examine and inspect the Collateral wherever located.
In addition, upon request of the Bank, each Borrower shall provide the Bank
with copies of agreements with, purchase orders from, and invoices to, the
Account Debtors, and copies of all shipping documents, delivery receipts, and
such other documentation and information relating to the Collateral as the Bank
may require.
4.8 Collateral Administration and Warranties Regarding the Inventory and the
Accounts. (a) Each Borrower shall promptly perform, on request of the Bank,
such acts as the Bank may determine to be necessary or advisable to create,
perfect, maintain, preserve, protect and continue the perfection of any lien
and security interest provided for in this Agreement or otherwise to carry out
the intent of this Agreement, including, without limitation, (i) obtaining
waivers or other similar documents reasonably necessary to permit the
enforcement of the
<PAGE> 15
remedies of the Bank hereunder, (ii) delivering to the Bank warehouse receipts
covering any portion of the Inventory located in warehouses and for which
warehouse receipts are issued, (iii) transferring Inventory to warehouses
designated by the Bank or leasing warehouses containing the Inventory to the
Bank or its designee, (iv) delivering to the Bank copies, and originals upon
the Bank's request, of all letters of credit on which such Borrower is named
beneficiary, and (vi) if any Inventory is at any time in the possession or
control of a warehouseman, bailee or any agent, notifying such person of the
Bank's lien and security interest in the Collateral and, upon the Bank's
request, instructing such persons to hold all Collateral for the Bank's account
subject to the Bank's instruction; (b) each of the Accounts is based on an
actual bona fide, and genuine (i) sale and delivery of goods or (ii) rendering
or performance of services in the ordinary course of business, the Account
Debtors have accepted such goods or services and unconditionally owe and are
obligated to pay the full amounts reflected in the invoices according to the
terms thereof without any defense, offset or counterclaim, (c) all of the
shipping and delivery receipts and other documents to be given to the Bank with
respect to the Accounts will be genuine, and if there are any disputes with any
of the Accounts, such Borrower will notify the Bank promptly and resolve or
settle such dispute at no expense or detriment to the Bank; (d) the Borrowers
shall not (i) extend, amend or otherwise modify the terms of any Account, (ii)
amend, modify or waive any term or condition of any contractual obligation
related thereto or (iii) redate any invoice or sale or make sales on extended
dating beyond that customary in such Borrower's industry; provided, however,
that the Borrowers may extend, amend or otherwise modify the terms of any
Account in the ordinary course of business, if such extension, amendment,
modification or waiver does not cause an Account to become or otherwise remain
(but for such action) an Eligible Account.
4.9 Preservation and Disposition of Collateral. Each Borrower shall (a)
obtain, prior to the placement of any Collateral in or upon any leased or
mortgaged real property, a waiver from the lessor and/or the mortgagee, as the
case may be, with respect to the rights (whether present or future) of the
lessor or mortgagee with respect to that Collateral; (b) advise the Bank
promptly, in writing and in reasonable detail, (i) of any material encumbrance
or claim asserted against any of the Collateral except as disclosed in Exhibit
B attached hereto; (ii) of any material change in the composition of the
Collateral; and (iii) of the occurrence of any other event that would have a
material adverse effect upon the aggregate value of the Collateral or upon the
security interest of the Bank; (c) not sell or otherwise dispose of the
Collateral, except as otherwise permitted by this Agreement (including without
limitation Section 6.3 below); (d) keep the Collateral in good condition and
shall not misuse, abuse, secrete, waste or destroy any of the same; and (e) not
use the Collateral in violation of any statute, ordinance, regulation, rule,
decree or order; (f) not permit to become liens any taxes, assessments, or
governmental charges or levies upon the Accounts or the Inventory. At its
option, the Bank may discharge taxes, liens, security interests or other
encumbrances at any time levied or placed on the Collateral and may pay for the
maintenance and preservation of the Collateral. Each of the Borrowers agrees to
reimburse the Bank upon demand for any payment made or any expense incurred
(including reasonable attorneys' fees) by the Bank pursuant to the foregoing
authorization. Should said sum not be paid to the Bank upon demand, interest
shall accrue thereon, from the date of demand until paid in full, at the
highest rate set forth in any document or instrument evidencing any of the
Obligations.
<PAGE> 16
4.10 Extensions and Compromises. With respect to any Collateral, each Borrower
assents to all extensions or postponements of the time of payment thereof or
any other indulgence in connection therewith, to each substitution, exchange or
release of Collateral, to the addition or release of any party primarily or
secondarily liable, to the acceptance of partial payments thereon and to the
settlement, compromise or adjustment thereof, all in such manner and at such
time or times as the Bank may deem advisable. The Bank shall have no duty as to
the collection or protection of Collateral or any income therefrom, nor as to
the preservation of rights against prior parties, nor as to the preservation of
any right pertaining thereto, beyond the safe custody of Collateral in the
possession of the Bank.
4.11 Financing Statements. At the request of the Bank, each Borrower shall
join with the Bank in executing, delivering and filing one or more financing
statements in a form satisfactory to the Bank and shall pay the cost of filing
the same in all public offices wherever filing is deemed by the Bank to be
necessary or desirable. A carbon, photographic or other reproduction of this
Agreement or of a financing statement shall be sufficient as a financing
statement, provided, however, the Bank shall not file a copy of this Agreement
unless such Borrower shall fail to execute and deliver a financing statement
after a written request by the Bank.
4.12 Bank's Appointment as Attorney-in-Fact. Each Borrower hereby irrevocably
constitutes and appoints the Bank and any officer or agent thereof, with full
power of substitution, as such Borrower's true and lawful attorney-in-fact with
full irrevocable power and authority in its place and stead and in its name or
in the Bank's own name, from time to time in the Bank's discretion, for the
purpose of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute any and all documents and instruments that
may be necessary or desirable to accomplish the purposes of this Agreement and,
without limiting the generality of the foregoing, hereby grants to the Bank the
power and right, on behalf of such Borrower, without notice to or assent: (a)
to execute, file and record all such financing statements, certificates of
title and other certificates of registration and operation and similar
documents and instruments as the Bank may deem necessary or desirable to
protect, perfect and validate the Bank's security interest in the Collateral
(provided, however, the Bank agrees not to exercise the power granted by this
subsection (a) until and unless it has requested that such Borrower execute
such financing statement, certificate or similar documents, and such Borrower
has failed to do so); (b) to receive, collect, take, indorse, sign, and deliver
in such Borrower's or the Bank's name, any and all checks, notes, drafts, or
other documents or instruments relating to the Collateral; and (c) upon the
occurrence of an Event of Default, (i) to notify postal authorities to change
the address for delivery of the Borrower's mail to an address designated by the
Bank, (ii) to open such mail delivered to the designated address, (iii) to sign
and indorse any invoices, freight or express bills, bills of lading, storage or
warehouse receipts, drafts against debtors, assignments, verifications and
notices in connection with accounts and other documents relating to the
Collateral; (iv) to commence and prosecute any suits, actions or proceedings at
law or in equity in any court of competent jurisdiction to collect the
Collateral or any part thereof and to enforce any other right in respect of any
Collateral; (v) to defend any suit, action or proceeding brought with respect
to any Collateral; (vi) to negotiate, settle, compromise or adjust any account,
suit, action or proceeding described above and, in connection therewith, to
give such discharges or releases as the Bank may deem appropriate; and (vii)
generally, to sell, transfer, pledge, make any agreement with respect to or
otherwise deal with any of the Collateral as fully
<PAGE> 17
and completely as though the Bank were the absolute owner thereof for all
purposes, and to do, at the Bank's option, at any time or from time to time,
all acts and things which the Bank deems necessary to protect, preserve or
realize upon the Collateral and the Bank's security interest therein, in order
to effect the intent of this Agreement.
Each Borrower hereby ratifies all that said attorneys shall lawfully do or
cause to be done by virtue hereof. This power of attorney is a power coupled
with an interest and shall be irrevocable. The powers conferred upon the Bank
hereunder are solely to protect its interests in the Collateral and shall not
impose any duty upon the Bank to exercise any such powers. The Bank shall be
accountable only for amounts that the Bank actually receives as a result of the
exercise of such powers and neither the Bank nor any of its officers,
directors, employees or agents shall be responsible to the Borrower for any act
or failure to act, except for the Bank's own gross negligence or willful
misconduct.
4.13 Remedies on Default. Upon the occurrence of an Event of Default, the Bank
shall have the rights and remedies of a secured party under this Agreement,
under any other instrument or agreement securing, evidencing or relating to the
Obligations and under the law of the State of Ohio or any other applicable
state law. Without limiting the generality of the foregoing, the Bank shall
have the right to take possession of the Collateral and all books and records
relating to the Collateral and for that purpose the Bank may enter upon any
premises on which the Collateral or books and records relating to the
Collateral or any part thereof may be situated and remove the same therefrom.
Except for the notices specified below of time and place of public sale or
disposition or time after which a private sale or disposition is to occur, each
of the Borrowers expressly agrees that the Bank, without demand of performance
or other demand, advertisement or notice of any kind to or upon such Borrower
or any other person or entity (all and each of which demands, advertisements
and/or notices are hereby expressly waived), may forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, lease, assign, give option or options to purchase or sell or
otherwise dispose of and deliver the Collateral (or contract to do so), or any
part thereof, in one or more parcels at public or private sale or sales, at any
of the Bank's offices or elsewhere at such prices as the Bank may deem best,
for cash or on credit or for future delivery without assumption of any credit
risk. The Bank shall have the right upon any such public sale or sales, and, to
the extent permitted by law, upon any such private sale or sales, to purchase
the whole or any part of the Collateral so sold, free of any right or equity of
redemption. Each of the Borrowers further agrees, (a) at the Bank's request, to
assemble the Collateral and to make it available to the Bank at such places as
the Bank may reasonably select and (b) to allow the Bank to use or occupy such
Borrower's premises, without charge, for the purpose of effecting the Bank's
remedies in respect of the Collateral. The Bank shall apply the net proceeds of
any such collection, recovery, receipt, appropriation, realization or sale,
after deducting all reasonable costs and expenses of every kind incurred in
connection therewith or incidental to the care or safekeeping of any or all of
the Collateral or in any way relating to the rights of the Bank hereunder,
including reasonable attorneys' fees and legal expenses, to the payment in
whole or in part of the Obligations, in such order as the Bank may elect, and
only, after so paying over such net proceeds and after the payment by the Bank
of any other amount required by any provision of law, need the Bank account for
the surplus, if any. To the extent permitted by applicable law, each Borrower
waives all claims, damages and demands against the Bank arising
<PAGE> 18
out of the repossession, retention, sale or disposition of the Collateral and
agrees that the Bank need not give more than ten days' notice pursuant to the
terms of this Agreement of the time and place of any public sale or of the time
after which a private sale may take place and that such notice is reasonable
notification of such matters. Each of the Borrowers shall remain liable for any
deficiency if the proceeds of any sale or disposition of the Collateral are
insufficient to pay all amounts to which the Bank is entitled and shall also be
liable for the costs of collecting any of the Obligations or otherwise
enforcing the terms thereof or of this Agreement, including reasonable
attorneys' fees.
5. Warranties and Representations. In order to induce the Bank to enter into
this Agreement and to make the Loans and the other financial accommodations to
the Borrowers and to the Guarantors and to issue the Letter of Credit described
herein, each Borrower represents and warrants to the Bank that the following
statements are true and correct:
5.1 Corporate Organization and Authority. Each of the Companies (a) is a
corporation duly organized, validly existing and in good standing under the
laws of the State of such Company's incorporation; (b) has all requisite
corporate power and authority and all necessary material licenses and permits
to own and operate its properties and to carry on its business as now conducted
and as presently proposed to be conducted; and (c) is not doing business or
conducting any activity in any jurisdiction in which it has not duly qualified
and become authorized to do business, unless the failure to so qualify will not
have or is not likely to have a Material Adverse Effect.
5.2 Borrowing is Legal and Authorized. (a) The Board of Directors of each
Company has duly authorized the execution and delivery of this Agreement and of
the notes, reimbursement agreements and guaranties and documents contemplated
herein; this Agreement, and such other documents executed in connection with
this Agreement will constitute valid and binding obligations enforceable in
accordance with their respective terms; (b) the execution of this Agreement and
related notes and documents and the compliance with all the provisions of this
Agreement (i) are within the corporate powers of each of the Companies and (ii)
are legal and will not conflict with, result in any breach in any of the
provisions of, constitute a default under, or result in the creation of any
lien or encumbrance upon any property of such Company under the provisions of,
any agreement, charter instrument, bylaw, or other instrument to which such
Company is a party or by which it may be bound; (c) there are no limitations in
any indenture, contract, agreement, mortgage, deed of trust or other agreement
or instrument to which any of the Companies is now a party or by which such
Company may be bound with respect to the payment of principal or interest on
any indebtedness, or such Company's ability to incur indebtedness including the
notes to be executed in connection with this Agreement.
5.3 Taxes. Except as set forth in Schedule 5.3 attached hereto, all tax
returns required to be filed by any of the Companies in any jurisdiction have
in fact been filed, and all taxes, assessments, fees and other governmental
charges upon the Companies or upon any of their properties, which are due and
payable have been paid. The Companies do not know of any proposed additional
tax assessment against it. The accruals for taxes on the books of the Companies
for its current fiscal period are adequate.
<PAGE> 19
5.4 Capital Structure. Centrum owns 100% of the capital stock of MSC. MSC
owns 100% of the capital stock of McInnes Services, Inc. McInnes Services, Inc.
owns 100% of the stock of Eballoy, EBA and McInnes International, Inc. The
corporate structure of each of the Borrowers and MSI is set forth in Schedule
5.4 attached hereto accurately represents to the Bank the following: (a) the
classes of capital stock of each of the Borrowers and MSI and par value of each
such class, all as authorized by the Articles of Incorporation of each and the
number of shares of each such class of stock issued and outstanding, the
registered owner or holder (legally or beneficially) thereof, and the
certificate numbers evidencing the foregoing. All shares of all classes of
capital stock issued are fully paid and nonassessable. The Borrowers and MSI do
not have outstanding any other stock or other equity security, or any other
instrument convertible to an equity security of any of them, or any commitment,
understanding, agreement or arrangement to issue, sell or have outstanding any
of the foregoing.
5.5 Compliance with Law. Each Company (a) is not in violation of any laws,
ordinances, governmental rules or regulations to which it is subject, and (b)
has not failed to obtain any licenses, permits, franchises or other
governmental or environmental authorizations necessary to the ownership of its
properties or to the conduct of its business, which violation or failure might
have or is likely to have a Material Adverse Effect.
5.6 Financial Statements; Full Disclosure. The financial statements of the
Borrowers and MSI for the fiscal year ending December 31, 1994 and for the
Guarantor for the fiscal year ending March 31, 1995, which have been supplied
to the Bank, have been prepared in accordance with generally accepted
accounting principles consistently applied and fairly represent each Company's
financial condition as of such date, and the financial statements of the
Borrowers and the Guarantors for the interim period ending December 31, 1995,
which have been supplied to the Bank, fairly represent each Company's financial
condition as of such date. No material adverse change in any of the Borrowers'
or any Guarantor's financial condition has occurred since such dates.The
financial statements referred to in this paragraph do not, nor does this
Agreement or any written statement furnished by the Borrowers or the Guarantors
to the Bank in connection with obtaining the Loans, contain any untrue
statement of a material fact or omit a material fact necessary to make the
statements contained therein or herein not misleading.
5.7 Financial Projections. The financial analyses, reports, business plans,
projections, and pro forma financial statements which have been supplied to the
Bank have been prepared in accordance with generally accepted accounting
principles consistently applied and are based on reasonable, good faith
assumptions about the Borrowers' and MSI's financial conditions and projected
financial conditions as of the dates of such financial information or
projections. No adverse change has occurred which would materially alter any
such analyses, reports, business plans, financial statements, projections, or
assumptions. Furthermore, none of the foregoing analyses or financial
information referred to in this paragraph, contain any untrue statement of a
material fact or a material fact necessary to make the statements contained
therein or herein not misleading.
5.8 Litigation; Adverse Effects. Except as set forth in Schedule 5.8 attached
hereto, there is no action, suit, audit, proceeding, investigation or
arbitration (or series of related actions, suits, proceedings, investigations
or arbitrations) before or by any governmental authority or
<PAGE> 20
private arbitrator pending or, to the knowledge of any of the Companies,
threatened against any of the Companies or any property of any of the Companies
(i) challenging the validity or the enforceability of any of this Agreement, or
any loan document, agreement, or instrument executed in connection herewith, or
(ii) which has had, shall have or is reasonably likely to have a Material
Adverse Effect. None of the Companies are (A) in violation of any applicable
requirements of law which violation shall have or is likely to result in a
Material Adverse Effect, or (B) subject to or in default with respect to any
final judgment, writ, injunction, restraining order or order of any nature,
decree, rule or regulation of any court or governmental authority, in each case
which shall have or is likely to have a Material Adverse Effect. "Material
Adverse Effect" means a material adverse effect upon (a) the business,
condition (financial or otherwise), operations, performance, properties or
prospects of any Borrower or Guarantor, (b) the ability of any Borrower or
Guarantor to perform its obligations under this Agreement or any document,
agreement, guaranty, or instrument executed in connection herewith, or (c) the
ability of the Bank to enforce the terms of this Agreement, or any document,
agreement, guaranty, or instrument executed in connection herewith.
5.9 No Insolvency. On the date of this Agreement and after giving effect to
all indebtedness of the Borrowers (including the Loans), each of the Borrowers
and MSI (a) will be able to pay its obligations as they become due and payable;
(b) has assets, the present fair saleable value of which exceeds the amount
that will be required to pay its probable liability on its obligations as the
same become absolute and matured; (c) has sufficient property, the sum of which
at a fair valuation exceeds all of its indebtedness; and (d) will have
sufficient capital to engage in its business. In addition, each Borrower's
grant of its respective Collateral, Real Estate Collateral, and Other
Collateral for the Loans constitutes fair consideration and reasonably
equivalent value because such Borrower has received or will receive the
proceeds of the Loans.
5.10 Government Consent. Neither the nature of any of the Companies or of the
business or properties of any Company, nor any relationship between any Company
and any other entity or person, nor any circumstance in connection with the
execution of this Agreement, is such as to require a consent, approval or
authorization of, or filing, registration or qualification with, any
governmental authority as a condition to the execution and delivery of this
Agreement and the notes and documents contemplated herein.
5.11 Title to Properties. Each of the Companies (a) has good title to all the
property in which it has a property interest, free from any liens and
encumbrances, except as set forth on Exhibit B attached to this Agreement, and
(b) has not agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its property whether now owned
or hereafter acquired to be subject to a lien or encumbrance except as provided
in this paragraph.
5.12 No Defaults. No event has occurred and no condition exists which would
constitute an Event of Default pursuant to this Agreement. None of the
Companies are in violation in any material respect of any term of any
agreement, charter instrument, bylaw or other instrument to which any of the
Companies is a party or by which such Company may be bound.
<PAGE> 21
5.13 ERISA Matters. None of the Borrowers or the Guarantors maintains or
contributes to any employee pension benefit plan defined in Section 3(2) of
ERISA in respect of which such Company is, or within the immediately preceding
three years was, an "employer," as defined in Section 3(5) of ERISA (a "Plan")
other than those listed on Schedule 5.13 attached hereto. Each Plan which is
intended to be qualified under Section 401(a) of the Internal Revenue Code as
currently in effect has been determined by the IRS to be so qualified, and each
trust related to any such Plan has been determined to be exempt from federal
income tax under Section 501 (a) of the Internal Revenue Code as currently in
effect. None of the Borrowers or the Guarantors know of any reason why such
Plans or trusts are no longer qualified or exempt following such determination
by the IRS. Except as disclosed in Schedule 5 13, none of the Borrowers or the
Guarantors maintains or contributes to any employee welfare benefit plan within
the meaning of Section 3(1) of ERISA which provides benefits to employees after
termination of employment other than as required by Section 601 of ERISA. The
Borrowers and the Guarantors are in compliance in all material respects with
the responsibilities, obligations or duties imposed on them by the Employee
Retirement Income Security Act of 1974, as amended from time to time, and any
successor statute ("ERISA"), the Internal Revenue Code and regulations
promulgated thereunder with respect to all Plans. No defined benefit plan,
defined in Section 3(35) of ERISA or Section 412 of the Internal Revenue Code,
in respect of which any Company is, or within the immediately preceding three
years was, an "employer," as defined in ERISA (a "Benefit Plan") has incurred
any accumulated funding deficiency (as defined in Sections 302(a)(2) of ERISA
and 412(a) of the Internal Revenue Code) whether or not waived. None of the
Borrowers, the Guarantors nor any fiduciary of any Plan which is not a
Multiemployer Plan (i) has engaged in a nonexempt prohibited transaction
described in Sections 406 of ERISA or 4975 of the Internal Revenue Code or (ii)
has taken or failed to take any action whereby any liability under Sections
4063, 4064, 4069, 4204 or 4212(c) of ERISA has been incurred or with the
passage of time will, if unremedied, be incurred with respect to any Benefit
Plan, and no such liability has been asserted against any of the Borrowers or
the Guarantors. None of the Borrowers or the Guarantors has any potential
liability under Sections 4063, 4064, 4069, 4204 or 4212(c) of ERISA. None of
the Borrowers or the Guarantors has incurred any liability to the PBGC which
remains outstanding other than the payment of premiums, and there are no
premium payments which have become due which are unpaid. Schedule B to the most
recent annual report filed with the IRS with respect to each Benefit Plan and
furnished to the Bank is complete and accurate. Since the date of each such
Schedule B, there has been no material adverse change in the funding status or
financial condition of the Benefit Plan relating to such Schedule B. None of
the Borrowers or the Guarantors has (i) failed to make a required contribution
or payment to a "multiemployer plan," as defined in Section 4001(a)3 of ERISA,
which is, or within the immediately preceding six years was, contributed to by
any Company ("Multiemployer Plan") or (ii) except as disclosed on Schedule 5.13
attached hereto, made a complete or partial withdrawal under Sections 4203 or
4205 of ERISA from a Multiemployer Plan. None of the Borrowers or the
Guarantors has failed to make a required installment or any other required
payment under Section 412 of the Internal Revenue Code on or before the due
date for such installment or other payment. None of the Borrowers or the
Guarantors is required to provide security to a Benefit Plan under Section
401(a)(29) of the Internal Revenue Code due to a Plan amendment that results in
an increase in current liability for the plan year. Except as disclosed on
Schedule 5.13 the Borrowers or any of them does not have, by reason of the
transactions contemplated hereby any obligation to make any payment to any
employee pursuant to any Plan
<PAGE> 22
or existing contract or arrangement. The Companies have given to the Bank
copies of all of the following: each Benefit Plan and related trust agreement
(including all amendments to such Plan and trust) in existence, or for which
any of the Companies has taken any corporate action to authorize the adoption
thereof, and in respect of which any of the Companies is currently an
"employer" as defined in section 3(5) of ERISA, and the most recent summary
plan description, actuarial report, determination letter issued by the IRS and
Form 5500 filed in respect of each such Benefit Plan in existence; a listing of
all of the Multiemployer Plans currently contributed to by any of the Companies
with the aggregate amount of the most recent annual contributions required to
be made by such Company to each such Multiemployer Plan, any information which
has been provided to such Company regarding withdrawal liability under any
Multiemployer Plan and the collective bargaining agreement pursuant to which
such contribution is required to be made; each employee welfare benefit plan
within the meaning of Section 3(1) of ERISA which provides benefits to
employees of such Company after termination of employment other than as
required by Section 601 of ERISA, the most recent summary plan description for
such plan and the aggregate amount of the most recent annual payments made to
terminated employees under each such plan.
5.14 Labor Matters. (a) Except as set forth in Schedule 5.14 attached hereto,
there is no collective bargaining agreement covering any of the employees of
any of the Borrowers or Guarantors. To the knowledge of each Borrower and
Guarantor, except as set forth on schedule 5.14, no attempt to organize the
employees of any Borrower or Guarantor is pending, threatened, planned or
contemplated; (b) Set forth in Schedule 5.14 is a list of all material
consulting agreements, executive employment agreements, executive compensation
plans, deferred compensation agreements, employee pension plans or retirement
plans, employee profit sharing plans, employee stock purchase and stock option
plans, severance plans, group life insurance, hospitalization insurance or
other employee benefit plans of each Borrower and Guarantor providing for
benefits for employees of each Borrower and Guarantor.
5.15 Environmental Protection. Except as set forth in Schedule 5.15 attached
hereto, or as disclosed in certain Phase I Environmental Reports dated January
6, 1996, prepared by Conestoga-Rovers & Associates and delivered to the Bank,
none of the Companies (a) has actual knowledge of the permanent placement,
burial or disposal of any Hazardous Substances (as hereinafter defined) on any
real property owned, leased, or used by any Company (the "Premises"), of any
spills, releases, discharges, leaks, or disposal of Hazardous Substances that
have occurred or are presently occurring on, under, or onto the Premises, or of
any spills, releases, discharges, leaks or disposal of Hazardous Substances
that have occurred or are occurring off the Premises as a result of the
improvement, operation, or use of the Premises which would result in
non-compliance with any of the Environmental Laws (as hereinafter defined) and
which might have a Material Adverse Effect; (b) is in violation of any
applicable Environmental Laws; (c) knows of any pending or threatened
environmental civil, criminal or administrative proceedings against the any of
the Companies relating to Hazardous Substances; (d) knows of any facts or
circumstances that would give rise to any future civil, criminal or
administrative proceeding against any of the Companies relating to Hazardous
Substances; and (e) will permit any of its employees, agents, contractors,
subcontractors, or any other person occupying or present on the Premises to
generate, manufacture, store, dispose or release on,
<PAGE> 23
about or under the Premises any Hazardous Substances which would result in the
Premises not complying with the Environmental Laws.
As used herein, "Hazardous Substances" shall mean and include all hazardous
and toxic substances, wastes, materials, compounds, pollutants and contaminants
(including, without limitation, asbestos, polychlorinated biphenyls, and
petroleum products) which are included under or regulated by the Comprehensive
Environmental Response, Compensation and Liability Act, as amended (42 U.S.C.
Section 9601, et seq.), the Hazardous Materials Transportation Act, as amended
(49 U.S.C. Section 1801, et seq.), the Toxic Substances Control Act, as amended
(15 U.S.C. Section 2601, et seq.), the Resource Conservation and Recovery Act,
as amended (42 U.S.C. Section 6901, et seq.), the Water Quality Act of 1987, as
amended (33 U.S.C. Section 1251, et seq.), the Clean Water Act, as amended (33
U.S.C. Section 1321 et seq.), the Federal Insecticide, Fungicide, and
Rodenticide Act, as amended (7 U.S.C. Sec. 136, et seq.), the National
Environmental Policy Act of 1969, as amended (42 U.S.C. Sec. 4321, et seq.),
and the Clean Air Act, as amended (42 U.S.C. Section 7401, et seq.), and any
other federal, state or local statute, ordinance, law, code, rule, regulation
or order regulating or imposing liability (including strict liability) or
standards of conduct regarding Hazardous Substances (hereinafter the
"Environmental Laws"), but does not include such substances as are permanently
incorporated into a structure or any part thereof in such a way as to preclude
their subsequent release into the environment, or the permanent or temporary
storage or disposal of household hazardous substances by tenants, and which are
thereby exempt from or do not give rise to any violation of any Environmental
Laws.
5.16 Warranties and Representations. On the date of each advance pursuant to
the Loans, the warranties and representations set forth in Section 5 hereof
shall be true and correct on and as of such date with the same effect as though
such warranties and representations had been made on and as of such date,
except to the extent that such warranties and representations expressly relate
to an earlier date.
6. Borrower Business Covenants. Each of the Companies covenants that on and
after the date of this Agreement until terminated pursuant to the terms of this
Agreement, or so long as any of the indebtedness provided for herein remains
unpaid:
6.1 Payment of Taxes and Claims. Such Company will pay (a) all taxes,
estimated payments, assessments and governmental charges or levies imposed upon
it or its property or assets or in respect of any of its franchises,
businesses, income or property before any penalty or interest accrues thereon;
and (b) all claims of materialmen, mechanics, carriers, warehousemen,
landlords, bailees and other like persons, (including, without limitation,
claims for labor, services, materials and supplies) for sums which have become
due and payable and which by law have or may become a lien or encumbrance upon
any of such Company's property or assets, prior to the time when any penalty or
fine shall be incurred with respect thereto; provided. however, that no such
taxes, assessments and governmental charges referred to in clause (a) above or
claims referred to in clause (b) above are required to be paid if being
contested in good faith by such Company, by appropriate proceedings diligently
instituted and conducted, without danger of any material risk to the Collateral
or the Bank's interest therein, without any of the same becoming a lien upon
the Collateral, and if such reserve or other
<PAGE> 24
appropriate provision, if any, as shall be required in conformity with GAAP,
shall have been made therefor.
6.2 Maintenance of Properties and Corporate Existence. Such Company shall (a)
maintain its property in good condition and make all renewals, replacements,
additions, betterments and improvements thereto which it deems necessary; (b)
maintain, with financially sound and reputable insurers, (i) insurance with
respect to its properties and business against such casualties and
contingencies, of such types (including but not limited to fire and casualty,
public liability, products liability, larceny, embezzlement or other criminal
misappropriation insurance) and in such amounts as is customary in the case of
entities of established reputations engaged in the same or a similar business
and similarly situated, with each such policy of insurance containing a clause
or endorsement satisfactory to the Bank that names the Bank as additional
insured and loss payee, as its interest may appear, and that provides that no
act, default or breach of warranty or condition of such Company or any other
person shall affect the right of the Bank to recover under such policy or
policies of insurance or to pay any premium in whole or in part relating
thereto, in such amounts as is customary in the case of entities of established
reputations engaged in the same or a similar business and similarly situated
and (ii) life insurance with respect to George H. Wells in an amount not less
than $950,000.00, all rights and benefits of which shall be collaterally
assigned to the Bank; (c) keep true books of records and accounts in which full
and correct entries will be made of all its business transactions, and reflect
in its financial statements adequate accruals and appropriations to reserves;
(d) do or cause to be done all things necessary (i) to preserve and keep in
full force and effect its existence, rights and franchises, and (ii) to
maintain its status as a corporation duly organized and existing and in good
standing under the laws of the state of its incorporation; and (e) not be in
violation of any laws, ordinances, or governmental rules and regulations or
fail to obtain any licenses, permits, franchises or other governmental
authorizations necessary to the ownership of its properties or to the conduct
of its business, which violation or failure to obtain might have or is likely
to have a Material Adverse Effect.
6.3 Sale of Assets, Merger, Subsidiaries, Tradenames and Conduct of Business.
Such Company shall not (a) except in the ordinary course of business, sell,
lease, transfer or otherwise dispose of, any of its assets, provided, however,
such Company shall be permitted to dispose of equipment that is obsolete or no
longer useful in the ordinary course of such Company's business, provided that
such disposition is not in excess of the aggregate sum of $50,000.00 in any
fiscal year; provided, further, that such Company provides notice to the Bank
of the sale of such equipment; and provided, further, if such equipment is
Eligible Equipment or is the Rolled Ring Division Equipment, such Company
obtains the prior written consent of the Bank, and the proceeds of such
disposition are applied to the Term Loan in inverse order of maturity of
installments, (b) consolidate with, merge into, enter into partnerships or
joint ventures with or make investments in any other entity, or permit any
other entity to consolidate with or merge into it, provided, however, that
Centrum shall be permitted to make investments in MSC, (c) acquire all or
substantially all of the assets or business of any other person or entity, or
(d) create or acquire any subsidiaries or conduct business under any other
tradenames without the prior written consent of the Bank. Such Company has no
subsidiaries except as disclosed in Schedule 5.4 attached hereto and conducts
business only in the name(s) of such Company and the tradenames set forth in
Schedule 6.3 attached hereto. None of the Borrowers
<PAGE> 25
or MSI shall engage in any business other than the businesses engaged in by
such Company on the date hereof and any business or activities which are
substantially similar or related thereto.
6.4 Negative Pledge. Such Company will not cause or permit or agree or
consent to cause or permit in the future (upon the happening of a contingency
or otherwise), any of its real or personal property, whether now owned or
hereafter acquired, to become subject to a lien or encumbrance, except: (i)
liens in connection with deposits required by workers' compensation,
unemployment insurance, social security and other like laws; (ii) taxes,
assessments, reservations, exceptions, encroachments, easements, rights of way,
covenants, conditions, restrictions, leases and other similar title exceptions
or encumbrances affecting real property, provided they do not in the aggregate
materially detract from the value of the Bank's lien or mortgage in such
property or materially interfere with its use in the ordinary conduct of
business; (iii) inchoate liens arising under ERISA to secure the contingent
liability of such Company; (iv) liens or encumbrances as set forth in Exhibit
attached to this Agreement; and (v) liens in connection with borrowings
permitted by Section 6.5 below. In addition, such Company will not grant or
agree to provide in the future (upon the happening of a contingency or
otherwise), a "negative pledge" or other covenant or agreement similar to this
Section 6.4 in favor of any other lender, creditor or third party.
6.5 Other Borrowings and Contingent Liabilities. Except for the credit
extensions set forth on Schedule 6.5 attached hereto, intercompany loans and
advances obtained by Centrum from American Handling, Inc., which in the
aggregate, shall not exceed the Maximum Upstream Limit (as defined in Section
6.13 below), the Loans, the IRB, and capitalized lease agreements and/or
purchase money financing transactions secured by the item or items being
purchased in an amount not to exceed the purchase price of such item or items
that, in the aggregate, do not exceed the sum of $100,000.00 in any one fiscal
year; the Companies, in the aggregate, will not (a) create or incur extensions
of credit or indebtedness for borrowed money, including without limitation,
letters of credit, or capitalized lease agreements or (b) guarantee, indorse or
otherwise become surety for or upon the obligations of others, except by
indorsement of negotiable instruments for deposit or collection in the ordinary
course of business. For the purposes of this Agreement, capitalized lease
agreements shall be valued at the purchase price of the item or items being
purchased in such fiscal year.
6.6 Sale of Accounts; No Consignment. Such Company shall not sell, factor,
assign, or encumber, except to the Bank and except for the factoring of certain
accounts receivable from Account Parties located in China, with the prior
written approval of the Bank and subject to any terms and conditions that the
Bank in its sole and absolute discretion may impose, any of its Accounts or
notes receivable. Such Company shall not permit any of its Inventory to be sold
or transferred on consignment or acquire or possess any of its Inventory on
consignment.
6.7 Minimum Security. Such Borrower shall maintain, as minimum security for
such Borrower's Revolving Loans, Eligible Raw Materials Inventory, Eligible
Material Content of WIP Inventory, Eligible Accounts and, if applicable,
Eligible Equipment Availability having an aggregate value such that such
Borrower's Borrowing Base will equal or exceed the aggregate unpaid principal
balance of such Borrower's Revolving Loans, and if such Borrower fails to do
so, such Borrower shall immediately pay to the Bank the difference between the
aggregate
<PAGE> 26
unpaid principal balance of such Borrower's Revolving Loans and such Borrower's
Borrowing Base.
6.8 Management. Centrum shall not permit any material change in its
management, nor shall it permit Timothy M. Hunter to cease to be active in the
management of the Borrowers' business, unless Mr. Hunter shall be replaced with
a person of similar qualifications expertise, experience and knowledge.
6.9 Acquisition of Capital Stock. Without the prior written consent of the
Bank, such Company shall not redeem or acquire any of its own capital stock or
any warrants or any securities relating to such capital stock or any debt or
debt securities of such Company except through (a) the use of the net proceeds
from the simultaneous sale of an equivalent amount of its capital stock for the
same purchase or redemption price, and (b) with respect to George H. Wells'
stock in Centrum, through the use of any life insurance proceeds on the life of
Mr. Wells which are not collaterally assigned to secure the Loans, provided,
however, notwithstanding the foregoing, Centrum may pay "Permitted Payments,"
as such term is defined in a certain Subordination Agreement - Investors, dated
of even date herewith, entered into by, between and among, the Bank, the
Borrowers, the Guarantors, Micafil, Inc., American Handling, Inc., First New
England Capital Limited Partnership, MorAmerica Capital Corporation, and North
Dakota Small Business Investment Company dated of even date herewith.
6.10 Trade Accounts Payable. Such Company shall not permit more than 10% of
its trade accounts payable to be past due for more than 30 days.
6.11 Compensation of Officers and Affiliated Persons. Such Company shall not
pay total compensation, including bonuses, fringe and other allied benefits, to
the executive officers set forth in Schedule 6.11 or any subsequent executive
officers holding the positions of such persons, in an annual amount in excess
of 115% of the amounts set forth in Schedule 6.11 attached hereto.
6.12 Cash Dividends and Other Distributions. Without the prior written consent
of the Bank, such Company shall not declare or pay any cash dividends in any
fiscal year. Such Company shall make no other distributions of any kind to
shareholders.
6.13 Transactions With Affiliates. Except for a certain existing loan from MSI
to EBA (the "MSI Loan"), such Company shall not directly or indirectly enter
into or permit to exist any transactions (including, without limitation, the
purchase, sale, lease or exchange of any property or the rendering of any
service) with any of its affiliates, shareholders or any affiliates of either
of the foregoing, on terms that are less favorable to such Company than those
which might be obtained at the time from persons or entities who are not
affiliated with such Company or its shareholders. "Affiliate" shall mean any
individual, partnership, corporation, or other entity which, directly or
indirectly, is in control of, is controlled by, or is under common control with
such Company. For the purposes of this definition,"control" of such entity
shall mean the power, directly or indirectly, to vote five percent or more of
the securities, units or other measures having ordinary voting power for the
election of directors, management committees, or similar committees of such
entity, or the power to direct or cause the direction of the management and
<PAGE> 27
policies of such entity, whether by contract or otherwise. The Borrowers shall
not enter into with any Affiliate any management contracts, allocation
agreements or agreements to pay any expenses of any Affiliate ("Management
Agreements") in excess of the aggregate sum of $150,000.00 in any fiscal year.
In addition, Centrum shall not cause or permit Micafil, Inc. to enter into any
Management Agreements which pay to Centrum or any other Affiliate in excess of
$240,000.00 in any fiscal year, paid on a monthly basis. In addition, Centrum
shall not cause or permit American Handling, Inc. to enter into any Management
Agreements or to make advances from American Handling, Inc. to Centrum or to
any other Affiliate which in the aggregate result in the transfer of funds or
the payment of amounts in excess of the Maximum Upstream Limit. "Maximum
Upstream Limit" shall mean with respect to American Handling, Inc. 100% of all
amounts in excess of the sum of (a) the unconsolidated shareholders' equity of
American Handling, Inc. as of the end of its immediately preceding fiscal year,
plus (b) the sum of $100,000.00. The Maximum Upstream Limit shall be determined
as of the end of each fiscal year of American Handling, Inc.
Furthermore, Centrum agrees that it shall not cause or permit American
Handling, Inc. to obtain a revolving loan or line of credit from any senior
lender, without the prior written consent of the Bank.
6.14 Tangible Net Worth. The Borrowers and MSI, on a consolidated basis, shall
maintain at all times a consolidated Tangible Net Worth of not less than the
following amounts for the periods specified below:
(a) from the date of this Agreement through and including May 30, 1996, not
less than $2,300,000.00, and
(b) beginning May 31, 1996, and continuing at all times thereafter, not less
than $2,500,000.00.
"Tangible Net Worth" shall mean shareholders' equity, minus the sum of all of
the following: (i) the excess of cost over the value of net assets of purchased
businesses, rights, and other similar intangibles, (ii) organizational
expenses, (iii) intangible assets (to the extent not reflected in the
foregoing), (iv) goodwill, (v) deferred charges or defend financing costs, (vi)
loans or advances to and/or accounts or notes receivable from Affiliates, (vii)
leasehold improvements, (viii) non-compete agreements, and (ix) any other asset
not directly related to the operation of the business of the Borrowers.
6.15 Ratio of Total Liabilities to Tangible Net Worth. The Borrowers and MSI,
on a consolidated basis, shall maintain at all times a ratio of consolidated
Total Liabilities to consolidated Tangible Net Worth of not greater than the
following amounts for the periods specified below:
(a) Not greater than 9.00 to 1.00 from the date of this Agreement through
and including May 30, 1996; and
<PAGE> 28
(b) not greater than 8.50 to 1.00 beginning May 31, 1996, and continuing at
all times thereafter.
"Total Liabilities" shall mean with respect to the Borrowers and MSI (a) all
indebtedness for borrowed money or for the deferred purchase price of property
or services, (b) any other indebtedness which is evidenced by a note, bond,
debenture or similar instrument, (c) all obligations with respect to any letter
of credit issued for the account of the Borrowers or MSI, (d) all obligations
in respect of acceptances issued or created for the account of the Borrowers or
MSI, (e) lease obligations which, in accordance with GAAP, should be
capitalized, (f) all liabilities (including lease obligations) secured by any
lien or encumbrance on any property owned by any of the Borrowers or MSI even
though such Company has not assumed or otherwise become liable for the payment
thereof, (g) all obligations of the Borrowers or MSI with respect to interest
rate protection agreements (valued at the termination value thereof computed in
accordance with a method approved by the International Swap Dealers
Association), and (i) all other obligations of the Borrower or MSI which, in
accordance with GAAP, would be classified upon a balance sheet as liabilities
(except capital stock and surplus earned).
6.16 Fixed Charge Coverage Ratio. The Borrowers and MSI, on a consolidated
basis, shall maintain at all times specified below a ratio of (a) EBITDA to (b)
Fixed Charges of not less than 1.20 to 1.00. The ratio of EBITDA to Fixed
Charges of the Borrowers and MSI shall be determined (beginning with the month
ending May 31, 1996) as of the last day of each month for the twelve month
period ending on such date, or, if fewer than twelve months have occurred since
April 1, 1996, for the period beginning April 1, 1996, to such date. "EBITDA"
shall mean for any period, (i) the sum of the amounts for such period of (A)
Net Income, (B) Interest Expense, (C) charges for federal, state, local and
foreign income taxes, (D) depreciation, amortization expense and non-cash
charges which were deducted in determining net income, (E) extraordinary losses
(and any unusual losses arising outside the ordinary course of business not
included in extraordinary losses determined in accordance with GAAP) and (F)
other non-operating expenses including, without limitation, LIFO adjustments,
which have been deducted in the determination of net income, minus (ii) the sum
of the amounts for such period of (X) extraordinary gains (and any unusual
gains arising outside the ordinary course of business not included in
extraordinary gains determined in accordance with GAAP), (Y) other
non-operating income not already excluded from the determination of net income
and (Z) to the extent not deducted from total interest expense, any net
payments received during such period under interest rate contracts and any
interest income received in respect of its cash investments. "Fixed Charges"
shall mean with respect to any period, the sum of (a) all amounts paid or
accrued or due and payable (without duplication), for federal, state, local and
foreign income taxes of the Borrowers and MSI for such period, as determined in
conformity with GAAP, plus (b) scheduled principal payments on term obligations
and capital leases for such period, plus (c) capital expenditures (net of the
amount of such capital expenditures financed by (i) purchase money indebtedness
approved by the Bank or permitted hereunder and (ii) the principal portion of
capital lease indebtedness permitted by this Agreement) made in accordance with
the terms of this Agreement during such period; plus (d) Interest Expense.
<PAGE> 29
"Net Income" for any period shall mean the consolidated net income (or
deficit) after taxes of the Borrowers and MSI for such period, which in
accordance with GAAP would be included as net income on the statements of income
of the Borrowers and MSI for such period.
"Interest Expense" means, for any period, as determined in conformity with
GAAP, total interest expense, whether paid or accrued or due and payable
(without duplication), including without limitation the interest component of
capital lease obligations for such period, all bank fees, commissions, discounts
and other fees and charges owed with respect to Letter of Credit and net costs
under interest rate contracts.
6.17 Capital Expenditures. The Borrowers and MSI, on a consolidated basis,
will not make any expenditure for fixed or capital assets, including by way of
the incurrence of capitalized lease obligations, expenditures for maintenance
and repairs which should be capitalized in accordance with generally accepted
accounting principles or otherwise in excess of $715,000.00 in any fiscal year.
Centrum will not make any expenditure for fixed or capital assets, including by
way of the incurrence of capitalized lease obligations, expenditures for
maintenance and repairs which should be capitalized in accordance with
generally accepted accounting principles or otherwise in excess of $100,000.00
in any fiscal year.
6.18 Loans and Advances. Except for the MSI Loan, the Borrowers and MSI, on a
consolidated basis, will not make any loans or advances to any person,
corporation or entity if such loans or advances will exceed an aggregate total
outstanding at any one time of $25,000.00.
6.19 Operating Lease Rentals. The Borrowers and MSI have entered into the
operating leases as set forth in Schedule 6.19 attached hereto The Borrowers
and MSI, on a consolidated basis, will not without the prior written approval
of the Bank enter into operating leases providing in the aggregate for annual
rentals which exceed $165,000.00.
6.20 Environmental Compliance and Indemnification. Each of the Borrowers
hereby indemnifies the Bank and holds the Bank harmless from and against any
loss, damage, cost, expense or liability (including strict liability) directly
or indirectly arising from or attributable to the generation, storage, release,
threatened release, discharge, disposal or presence (whether prior to or during
the term of the Loans) of Hazardous Substances on, under or about the Premises
(whether by such Borrower or any employees, agents, contractors or
subcontractors of such Borrower or any predecessor in title or any third
persons occupying or present on the Premises), or the breach of any of the
representations and warranties regarding the Premises, including, without
limitation: (a) those damages or expenses arising under the Environmental Laws;
(b) the costs of any repair, cleanup or detoxification of the Premises,
including the soil and ground water thereof, and the preparation and
implementation of any closure, remedial or other required plans; (c) damage to
any natural resources; and (d) all reasonable costs and expenses incurred by
the Bank in connection with clauses (a), (b) and (c) including, but not limited
to reasonable attorneys' fees. In addition, MSC at its expense agrees to cause
completion or remediation, to the satisfaction of the Bank, of each of those
environmental conditions set forth in Schedule 6.20 attached hereto, and no
later than the time periods set forth in Schedule 6.20, the compliance or
completion of each such condition shall be certified by an environmental
consultant satisfactory to the Bank.
<PAGE> 30
The indemnification provided for herein shall not apply to any losses,
liabilities, damages, injuries, expenses or costs which: (i) arise from the
gross negligence or willful misconduct of the Bank, or (ii) relate to Hazardous
Substances placed or disposed of on the Premises after the Bank acquires title
to the Premises through foreclosure or otherwise.
6.21 Maintenance of Accounts. Except for an existing account at PNC Bank,
National Association, which is subject to a Blocked Account and shall be closed
within 60 days of the date of this Agreement, the payroll accounts set forth on
Schedule 6.21 attached hereto, and an operating account at PNC Bank (Delaware)
which, in the aggregate shall not exceed $10,000.00 at any time, and an
operating account of Centrum at Capital Bank, N.A., which account shall not
exceed $10,000.00 at any time, each of the Borrowers and the Guarantors shall
maintain all of its operating and deposit accounts at the Bank.
6.22 Accounts Payable Turnover Days. At any time, on a consolidated basis, the
Borrower's Accounts Payable Turnover Days shall not exceed 60. "Accounts
Payable Turnover Days" shall mean the ratio of such Borrower's (a) average
month-end balance of trade accounts payable for such period, to (b) the Average
Daily Cost of Sales for such period. "Average Daily Cost of Sales" shall mean
the total cost of sales for such period divided by the number of days in such
period. Such ratio shall be determined as of the last day of each month for the
twelve month period ending on such date or, if fewer than twelve months have
occurred since the date of this Agreement, for the period from the date of this
Agreement to such date.
6.23 Accounts Receivable Turnover Days. At any time, on a consolidated basis,
the Borrowers' Accounts Receivable Turnover Days shall not exceed 75. "Accounts
Receivable Turnover Days" shall mean the ratio of such Borrower's (a) average
month-end balance of trade accounts receivable for such period, to (b) the
Average Daily Sales for such period. "Average Daily Sales" shall mean the
Company's total sales for such period divided by the number of days in such
period. Such ratio shall be determined as of the last day of each month for the
twelve month period ending on such date or, if fewer than twelve months have
occurred since the date of this Agreement, for the period from the date of this
Agreement to such date.
6.24 Inventory Turnover Days. At any time, on a consolidated basis, the
Borrowers' Inventory Turnover Days shall not exceed 110. "Inventory Turnover
Days " shall mean the ratio of such Borrower's (a) average month-end balance of
inventory at cost, to (b) the Average Daily Cost of Sales for such period. Such
ratio shall be determined as of the last day of each month for the twelve month
period ending on such date, or, if fewer than twelve months have occurred since
the date of this Agreement, for the period from the date of this Agreement to
such date.
6.25 Expense Reduction. The Borrowers shall be in full and complete compliance
with that certain letter agreement relating to the Borrowers' plan of reduction
and elimination of certain expenses.
7. Financial Information and Reporting. The Companies shall deliver the
following to the Bank:
<PAGE> 31
(a) within 45 days after the first month of each fiscal year, and within 30
days after the end of each other month, consolidated and consolidating
financial statements, including balance sheets and statements of income
and surplus, and statements of cash flows, of each of the Borrowers and
the Guarantors, certified by the president or chief financial officer of
Centrum or MSC (a "Financial Officer") as fairly representing each
Borrower's and Guarantor's financial condition as of the end of such
period;
(b) within 45 days after the first month of each fiscal year, and within 30
days after the end of each month, statements signed by a Financial
Officer certifying the compliance of each Borrower and Guarantors with
the terms of this Agreement and the calculation of the financial
covenants contained in Section 6 above;
(c) through and including June 30, 1996, within 10 days after the end of
each month, and thereafter within 5 days after the end of each month, a
current loan and collateral report, or other writings for each Borrower
satisfactory to the Bank for the calculation of, or setting forth the
calculation of, the Borrowing Base with respect to each Borrower;
(d) daily, a loan and collateral report, together with supporting
information, unless the Borrowing Base availability, as reflected on
the Bank's system, exceeds the Revolving Loans by $500,000 or more;
(e) within 20 days after the end of each month, an accounts reconciliation
report and an inventory reconciliation report for each Borrower, in form
satisfactory to the Bank, signed by a Financial Officer, in detail
satisfactory to the Bank;
(f) within 20 days after the end of each month, an inventory detail report
of each Borrower, signed by a Financial Officer, in form satisfactory to
the Bank;
(g) within 20 days after the end of each month for each of the Borrowers and
MSI, a report, in form satisfactory to the Bank, signed by a Financial
Officer setting forth the number and dollar total of accounts receivable
past due for not more than 30 days, the number and dollar total past due
for not more than 60 days, the number and dollar total past due for not
more than 90 days, and the number and dollar total past due for more
than 90 days;
(h) within 20 days after the end of each month (beginning with the month
ending May 31, 1996), a report for each of the Borrowers and MSI, in
form satisfactory to the Bank, signed by a Financial Officer setting
forth the number, dollar amount and party of accounts payable remaining
due and payable less than 31 days from the date of the original invoice
therefor, less than 61 days from the date of the original invoice
therefor, less than 91 days from the date of the original invoice
therefor, and more than 90 days from the date of the original invoice
therefor;
<PAGE> 32
(i) within 90 days after the end of each fiscal year, audited unqualified
consolidated financial statements for the Borrowers and MSI, together
with consolidating schedules, prepared in accordance with generally
accepted accounting principles consistently applied and certified by
independent public accountants satisfactory to the Bank, containing a
balance sheet, statements of income and surplus, statements of cash
flows and reconciliation of capital accounts, along with any management
letters written by such accountants;
(j) within 90 days after the end of each fiscal year, audited unqualified
financial statements for Centrum together with consolidating schedules
prepared in accordance with generally accepted accounting principles
consistently applied and certified by independent public accountants
satisfactory to the Bank, containing a balance sheet, statements of
income and surplus, statements of cash flows and reconciliation of
capital accounts, along with any management letters written by such
accountants;
(k) promptly upon the filing or release, as the case may be, copies of any
Securities and Exchange Commission or State Securities Law disclosures,
filings, documents or any press releases;
(l) within 90 days after the end of each fiscal year, a statement signed by
independent public accountants certifying that the Borrowers, MSI and
Centrum are in compliance with the terms of this Agreement;
(m) no later than 30 days prior to the end of each fiscal year, financial
projections for each of the Borrowers and the Guarantors for the current
fiscal year, on a monthly basis, including a projected income statement,
balance sheet, and cash flow and comparative information for the
comparative period of the preceding fiscal year;
(n) immediately upon becoming aware of the existence of any Pending Default,
Event of Default or breach of any term or conditions of this Agreement,
a written notice specifying the nature and period of existence thereof
and what action such Borrower or Guarantor is taking or proposes to take
with respect thereto;
(o) within 20 days after filing, a true and complete copy of each Borrower
and Guarantor's federal and state income tax return together with all
schedules attached thereto;
(p) within 90 days after the date of this Agreement an audited opening
balance sheet of the Borrowers and MSI, prepared in accordance with GAAP
and certified by independent accountants satisfactory to the Bank;
(q) within 90 days after the end of each fiscal year beginning March 31,
1997, a multi-media compliance report updating the environmental
conditions at each of
<PAGE> 33
MSC, Eballoy, and EBA certified by an environmental consultant approved
by the Bank;
(r) at the request of the Bank, such other information as the Bank may from
time to time reasonably require.
8. Default
8.1 Events of Default. Each of the following shall constitute an "Event of
Default" hereunder: (a) the failure by the Borrowers to make any payment of
principal, interest or any other sum due and payable under any note or
reimbursement agreement executed in connection with this Agreement on or before
the date such payment is due; (b) the failure by any Borrower or Guarantor to
perform or observe any agreement, term, or covenant applicable to it contained
in Sections 1.2, 3 (except for and excluding Sections 3.3 and 3.5), 3.3 or 3.5
(with prior notice to the Borrowers) 4, 6 (except for and excluding Sections
6.2(c), (d), and (e), 6.10, and 6.11 or 7 of this Agreement; (c) the failure by
any Borrower or Guarantor to comply with any other provision of this Agreement
applicable to it, or to perform or observe any covenant contained in any
mortgage, security agreement or other agreement in favor of the Bank, and such
failure continues for more than 30 days after such failure shall first become
known to any Financial Officer; (d) any warranty, representation or other
statement by or on behalf of any Company contained in this Agreement or in any
instrument furnished in compliance with or in reference to this Agreement is
false or misleading in any material respect, (e) any Company becomes insolvent
or makes an assignment for the benefit of creditors, or consents to the
appointment of a trustee, receiver or liquidator; (f) bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings are
instituted by any of the Companies, or against any of the Companies, and in the
latter case, are not dismissed or withdrawn within 30 days after the filing of
such proceedings; (g) a final judgment or judgments for the payment of money
aggregating in excess of $50,000.00 is or are outstanding against any of the
Companies, and any such judgment or judgments have not been discharged in full
or stayed; (h) the occurrence of any event which allows the acceleration of the
maturity of any indebtedness of any Company to the Bank, any of the Bank's
affiliates, or any material indebtedness to any other person, corporation or
entity under any indenture, agreement or undertaking; (i) the occurrence of any
"Event of Default" under a certain Note and Warrant Purchase Agreement (the
"Note Agreement") between Centrum, American Handling, Inc., Micafil, Inc., and
the "Investors" as defined in the Note Agreement dated as of February 29, 1996,
or any default under any agreement related thereto, including without
limitation, a certain Put Agreement between Centrum and the Investors dated as
of February 29, 1996, or the occurrence of any breach, default, or Event of
Default under the terms of those certain promissory notes issued by Centrum to
those noteholders set forth on Schedule 8.1(i) each dated as of February 29,
1996; (j) the default by, dissolution of, or death of any guarantor, insurer or
other surety for any of the Companies; (k) a Change of Control of any of the
Borrowers or the Guarantors shall have occurred ("Change of Control" shall mean
(i) the replacement of a majority of the Board of Directors of any entity from
the directors who constituted the Board of Directors on the date of this
Agreement for any reason other than death or disability, and such replacement
shall not have been approved by the Board of Directors of such entity as
constituted on the date of this Agreement (or as changed over time with the
approval of the Board of Directors of such entity) or (ii) a company person,
entity or group of
<PAGE> 34
companies or entities acting in concert, shall, as a result of a tender or
exchange offer, open market purchases, privately negotiated purchases, exercise
of the stock pledge or otherwise, have become the beneficial owner (within the
meaning of Rule 13d.3 under the Securities Exchange Act of 1934, as amended) of
(A) any securities of the Borrowers or MSI or (B) securities of Centrum
representing more than 30% of the combined voting power of the then outstanding
securities of Centrum ordinarily having the right to vote in the election of
directors); or (1) the Bank, in its sole good faith discretion, determines that
a Material Adverse Effect has occurred.
8.2 Default Remedies. If an Event of Default exists, the Bank may immediately
exercise any right, power or remedy permitted to the Bank by law or any
provision of this Agreement, and shall have, in particular, without limiting
the generality of the foregoing, the right to declare the entire principal and
all interest accrued on all notes then outstanding pursuant to this Agreement
to be forthwith due and payable, without any presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived by the
Borrower.
9. Miscellaneous.
9.1 Notices. (a) All communications under this Agreement or under the notes
executed pursuant hereto shall be in writing and shall be mailed by facsimile
or by a nationally recognized overnight delivery service (1) if to the Bank, at
the following address, or at such other address as may have been furnished in
writing to MSC and Centrum by the Bank:
The Huntington National Bank
41 South High Street
Columbus, Ohio 43215
Attn: Bill T. Frazier
Vice President
Facsimile: 614-480-5073
with a copy to:
Porter, Wright, Morris & Arthur
41 South High Street
Columbus, Ohio 43215
Attn: Timothy E. Grady, Esq.
Facsimile: 614-227-2100
(2) if to the Borrowers or MSI or Centrum, at the following addresses, or at
such other address as may have been furnished in writing to the Bank by such
Company:
McInnes Steel Company
441 East Main Street
Corry, Pennsylvania 16407
Attn: Chief Financial Officer
Facsimile: 814-664-2372
<PAGE> 35
Centrum Industries, Inc.
6135 Trust Drive, Suite 104A
Holland, Ohio 43528
Attn: George H. Wells
Chief Executive Officer
Facsimile: 419-868-3940
with a copy to:
Fuller & Henry
One Seagate
17th Floor
Toledo, Ohio 43604-2606
Attn: Jack W. Hilbert, II, Esq.
Facsimile: 419-247-2665
(b) any notice so addressed and sent by overnight delivery shall be deemed to
be given one day after the same is delivered to the overnight delivery service,
and any notice sent by telecopier shall be deemed to be given when confirmed.
9.2 Access to Accountants. Each of the Companies hereby irrevocably
authorizes its certified public accountants to provide to the Bank any and all
information that the Bank requests from time to time with regard to any of the
Companies, and to discuss with the Bank from time to time any and all matters
relating to any of the Companies In furtherance of the foregoing, each of the
Companies hereby waives any privilege or claim of confidentiality to the extent
such might otherwise prevent such accountants from providing such information
to the Bank or discussing such matters with the Bank.
9.3 Reproduction of Documents. This Agreement and all documents relating
hereto, including, without limitation, (a) consents, waivers and modifications
which may hereafter be executed, (b) documents received by the Bank at the
closing or otherwise, and (c) financial statements, certificates and other
information previously or hereafter furnished to the Bank, may be reproduced by
the Bank by any photographic, photostatic, microfilm, micro-card, miniature
photographic or other similar process and the Bank may destroy any original
document so reproduced. Each of the Companies agrees and stipulates that any
such reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by the Bank in the
regular course of business) and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
9.4 Survival; Successors and Assigns. All warranties, representations, and
covenants made by any of the Companies herein or on any certificate or other
instrument delivered by any Company or on its behalf under this Agreement shall
be considered to have been relied upon by the Bank and shall survive the
closing of the Loans regardless of any investigation made by the Bank on its
behalf under this Agreement shall be considered to have been relied upon by the
Bank and shall survive the closing of the Loans regardless of any investigation
made by the Bank
<PAGE> 36
on its behalf. All statements in any such certificate or other instrument
shall constitute warranties and representations by any Company. This Agreement
shall inure to the benefit of and be binding upon the heirs, successors and
assigns of each of the parties.
9.5 Amendment and Waiver, Duplicate Originals. All references to this
Agreement shall also include all amendments, extensions, renewals,
modifications, and substitutions thereto and thereof made in writing and
executed by both the Companies and the Bank. This Agreement may be amended,
and the observance of any term of this Agreement may be waived, with (and only
with) the written consent of the Companies and the Bank; provided however that
nothing herein shall change the Bank's sole discretion (as set forth elsewhere
in this Agreement) to make advances, determinations, decisions or to take or
refrain from taking other actions. No delay or failure or other course of
conduct by the Bank in the exercise of any power or right shall operate as a
waiver thereof; nor shall any single or partial exercise of the same preclude
any other or further exercise thereof, or the exercise of any other power or
right. Two or more duplicate originals of this Agreement may be signed by the
parties, each of which shall be an original but all of which together shall
constitute one and the same instrument.
9.6 Uniform Commercial Code and Generally Accepted Accounting Principles.
Unless the context otherwise requires, or terms are defined in this Agreement,
all terms used herein which are defined in the Uniform Commercial Code as
enacted in Ohio shall have the meaning stated therein, and all accounting terms
shall be determined in accordance with generally accepted accounting
principles, consistently applied ("GAAP"). The Borrowers' fiscal year begins on
January 1, and ends on December 31, provided, however, beginning April 1, 1996,
the Borrowers' and the Guarantors' fiscal years will begin on April 1 and end
on March 31 of the immediately succeeding fiscal year. None of the Companies
shall change its fiscal year without the prior written consent of the Bank
except as permitted by this paragraph.
9.7 Enforceability and Governing Law. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction, as to such jurisdiction,
shall be ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. No delay or omission on
the part of the Bank in exercising any right shall operate as a waiver of such
right or any other right. All of the Bank's rights and remedies, whether
evidenced hereby or by any other agreement or instrument, shall be cumulative
and may be exercised singularly or concurrently. This Agreement shall be
governed by and construed in accordance with the laws of the State of Ohio;
provided, however, that to the extent that the creation, validity, attachment,
perfection, priority, maintenance or continuation of the security interests
created by this Agreement, or the mortgage interest created by the mortgages
executed in connection herewith, in effect of such matters in respect to
particular collateral, is governed by the laws of the Commonwealth of
Pennsylvania, then the laws of such jurisdiction shall apply, and the
provisions of this Agreement relating to the creation, validity, attachment,
perfection, priority, maintenance or continuation of such security interests or
mortgage interests and the effect of such matters in respect of such Collateral
shall be governed and construed in accordance with the laws of such
jurisdiction. Each of the Companies agrees that any legal suit, action or
proceeding arising out of or relating to this Agreement may be instituted in a
state or federal court of appropriate subject matter jurisdiction
<PAGE> 37
in the State of Ohio; waives any objection which it may have now or hereafter
to the venue of any suit, action or proceeding; and irrevocably submits to the
jurisdiction of any such court in any such suit, action or proceeding.
9.8 Waiver of Right to Trial by Jury. EACH PARTY TO THIS AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION (1) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (2) IN
ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE
TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND
EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY
PART TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO
TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
9.9 Advertising. Each of the Companies agrees that the Bank may advertise or
otherwise disclose for marketing purposes the extent and nature of the credit
extended or to be extended and other services provided by the Bank in
connection with or relating in any way to the Loans.
9.10 No Consequential Damages. No claim may be made by any of the Companies,
any officers, directors, or agents against the Bank or its affiliates,
directors, officers, employees, attorneys or agents for any special, indirect,
punitive, or consequential damages in respect of any breach or wrongful conduct
(whether the claim therefor is based in contract, tort or duty imposed by law)
in connection with, arising out of or in any way related to the transactions
contemplated and relationship established by this Agreement, or any act,
omission or event occurring in connection therewith, and each of the Companies
hereby waives, releases and agrees not to sue upon any such claim for any such
damages, whether or not accrued and whether or not known or suspected to exist
in its favor.
9.11 Conditions Precedent to the Loans. The obligation of the Bank to make the
Loans requested to be made shall be subject to satisfaction of the following
conditions precedent:
(a) The Bank shall receive on or before the date of the initial advance
hereunder all of the following: (i) this Agreement, the promissory notes and
other agreements, documents and instruments described in Exhibit D attached
hereto, each duly executed where appropriate and in form and substance
satisfactory to the Bank; and (ii) such additional documentation as the Bank
may reasonably request.
<PAGE> 38
(b) Without limiting the foregoing, each of the respective Companies hereby
directs its counsel, MacDonald Illig Jones & Britton LLP and Fuller & Henry
P.L.L., to prepare and deliver to the Bank the respective opinions referred to
in Exhibit D.
9.12 Indemnity. Each of the Companies shall indemnify the Bank from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements of any kind or
nature whatsoever (including, without limitation, fees and disbursements of
counsel) which may be imposed on, incurred by, or asserted against the Bank in
any litigation, proceeding or investigation instituted or conducted by any
governmental agency or instrumentality or any other person or entity with
respect to any aspect of, or any transaction contemplated by, or referred to
in, or any matter related to, this Agreement, whether or not the Bank is a
party thereto, except to the extent that any of the foregoing arises out of the
willful misconduct of the Bank, as determined in a final, non-appealable
judgment by a court of competent jurisdiction.
9.13 Conditions Precedent to Subsequent Money Advances. The obligation of Bank
to make any disbursement or advance subsequent to the initial disbursement or
initial advance under the Loans, of any portion of any of the Loans is subject
to all the conditions and requirements of this Agreement and delivery of the
following required documents, or other action, all of which are conditions
precedent:
(a) Compliance. Each of the Companies shall have complied and shall then
be in compliance with all the terms, covenants and conditions of the Agreement
which are binding upon it.
(b) Continuation of Representations and Warranties: The representations
and warranties herein contained shall be true, with the same effect as though
such representations and warranties had been made at the time of the making of
such advance, and any request for an advance hereunder shall be deemed a
representation and warranty of same.
(c) Confirmation of Conditions Precedent: Each of the Companies shall then
be in compliance with and able to confirm all the foregoing conditions precedent
with the same effect as though such conditions precedent were requirements to
the making of any advance contemplated herein.
9.14 Confidentiality. The Bank shall hold all non-public information obtained
pursuant to the requirements of this Agreement in accordance with the Bank's
customary procedures for handling confidential information of this nature and
in accordance with safe and sound banking practices, and in any event may make
disclosure reasonably required by a participant in connection with the
contemplated participation, or as required or requested by any governmental
authority or representative thereof, or pursuant to legal process, or to its
accountants, attorneys and other advisors and shall require any such
participant to agree to comply with this Section 9.14.
<PAGE> 39
10. Index of Definitions.
"Account Debtor" is defined in Section 2. 1.
"Accounts" is defined in Section 4.1.
"Accounts Payable Turnover Days" is defined in Section 6.22.
"Accounts Receivable Turnover Days" is defined in Section 6.23.
"Affiliate" is defined in Section 6.13.
"Agreement" is defined in the preamble.
"Average Daily Cost of Sales" is defined in Section 6.22.
"Average Daily Sales" is defined in Section 6.23.
"Bank" is defined in the preamble.
"Benefit Plan" is defined in Section 5.13.
"Borrower" and "Borrowers" are defined in the preamble.
"Borrowing Base" is defined in Section 1.2.
"Cash Collection Account" is defined in Section 4.4.
"Centrum" is defined in the Preamble.
"Change of Control" is defined in Section 8.1.
"Collateral" is defined in Section 4.1.
"Company" and "Companies" are defined in the preamble.
"Contra" is defined in Section 2.1.
"Control" is defined in Section 6.13.
"Deposits" is defined in Section 4.1.
"EBA" is defined in the preamble.
"Eballoy" is defined in the preamble.
<PAGE> 40
"EBITDA" is defined in Section 6.16.
"Eligible Accounts" is defined in Section 2.1.
"Eligible Equipment" is defined in Section 2.5.
"Eligible Equipment Availability" is defined in Section 1.2.
"Eligible Material Content of WIP Inventory" is defined in Section 2.3.
"Eligible Raw Materials Inventory" is defined in Section 2.2.
"Employer" is defined in Section 5.13.
"Environmental Laws" is defined in Section 5.15.
"Equipment" is defined in Section 4.1.
"ERISA" is defined in Section 5.13.
"Event of Default" is defined in Section 8.1.
"Financial Officer" is defined in Section 7.
"Fixed Charges" is defined in Section 6.16.
"GAAP" is defined in Section 9.6.
"GE" is defined in Section 2.1.
"Guarantor" and "Guarantors" is defined in the preamble.
"Guarantor Collateral" is defined in Section 3.6.
"Guaranties" is defined in Section 3.6.
"Hazardous Substances" is defined in Section 5.15.
"Intellectual Property" is defined in Section 4.1.
"Interest Expense" is defined in Section 6.16.
"IRB" is defined in Section 2.6.
"Inventory" is defined in Section 4.1.
<PAGE> 41
"Inventory Turnover Days" is defined in Section 6.24.
"Letters of Credit" is defined in Section 1.1.
"Levy Appraisal" is defined in Section 2.5.
"Loans" is defined in Section 1.1.
"Maturity Date" is defined in Section 3.5.
"Material Adverse Effect" is defined in Section 5.8.
"Maximum Upstream Limit" is defined in Section 6.13.
"MSC" is defined in the preamble.
"MSI" is defined in the preamble.
"MSI Loan" is defined in Section 6.13.
"Multiemployer Plan" is defined in Section 5.13.
"Net Income" is defined in Section 6.16.
"Non-Recourse Guaranties" is defined in Section 3.6.
"Non-Recourse Guarantor Collateral" is defined in Section 3.6.
"Obligations" is defined in Section 4.1.
"Other Collateral" is defined in Section 3.7.
"Pending Default" is defined in Section 1.4.
"PIDA Loan" is defined in Section 2.6.
"Plan" is defined in Section 5.13.
"Premises" is defined in Section 5.15.
"Proceeds" is defined in Section 4.1.
"Real Estate Collateral" is defined in Section 3.7.
"Reimbursement Agreement" is defined in Section 1.3.
<PAGE> 42
"Revolving Loan" and "Revolving Loans" are defined in Section 1.1.
"Rolled Ring Division Equipment" is defined in Section 2.5.
"Tangible Net Worth" is defined in Section 6.14.
"Term Loan" is defined in Section 1.1.
"Total Liabilities" is defined in Section 6.15.
"Transactions" is defined in Section 3.4.
"Westinghouse" is defined in Section 2.1.
Each of the parties has signed this Agreement as of the date set forth in the
preamble above.
McINNES STEEL COMPANY
By /s/ Timothy M. Hunter
--------------------------
Its Secretary/Treasurer
--------------------------
McINNES STEEL SERVICES, INC.
By /s/ Timothy M. Hunter
--------------------------
Its Secretary/Treasurer
--------------------------
EBALLOY GLASS PRODUCTS COMPANY
By /s/ Timothy M. Hunter
--------------------------
Its Secretary/Treasurer
--------------------------
ERIE BRONZE & ALUMINUM COMPANY
By /s/ Timothy M. Hunter
--------------------------
Its Secretary/Treasurer
--------------------------
<PAGE> 43
McINNES INTERNATIONAL, INC.
By /s/ Timothy M. Hunter
--------------------------
Its Secretary/Treasurer
--------------------------
CENTRUM INDUSTRIES, INC.
By /s/ George Wells
--------------------------
Its President
--------------------------
THE HUNTINGTON NATIONAL BANK
By /s/ Bill T. Frazier
--------------------------
Its Vice President
--------------------------
<PAGE> 1
EXHIBIT 10.10
________________________________________________________________________________
GUARANTOR: Centrum Industries, Inc. BORROWER: McInnes Steel Company
ADDRESS: 6135 Trust Drive ADDRESS: 441 East Main Street
Suite 104A Corry, PA 16407
Holland, OH 43528
BORROWER: Eballoy Glass Products Company
ADDRESS: 2103 East 33rd Street
Erie, Pennsylvania 16510
BORROWER: Erie Bronze & Aluminum Company
ADDRESS: 6300 West Ridge Road
Erie, Pennsylvania 16505
BORROWER: McInnes International, Inc.
ADDRESS: Guardian Building
Havensight, 2nd Floor
P.O. Box 12150
St. Thomas, V.1.00801
________________________________________________________________________________
CONTINUING GUARANTY
UNLIMITED
For the purpose of inducing The Huntington National Bank (hereinafter referred
to as "Bank") to lend money or extend credit to McInnes Steel Company, Eballoy
Glass Products Company, Erie Bronze & Aluminum Company and McInnes
International. Inc. (hereinafter collectively referred to as "Borrower"), the
undersigned (hereinafter referred to as "Guarantor") hereby unconditionally
guarantees the prompt and full payment to Bank when due, whether by
acceleration or otherwise, of all Obligations of any kind for which Borrower is
now or may hereafter become liable to Bank in any manner.
The word "Obligations" is used in its most comprehensive sense and includes,
without limitation, all indebtedness, debts and liabilities (including
principal, interest, late charges, collection costs, attorneys' fees and the
like) of Borrower to Bank, either created by Borrower alone or together with
another or others, primary or secondary, secured or unsecured, absolute or
contingent, liquidated or unliquidated, direct or indirect whether evidenced by
note, draft, application for letter of credit, agreements of guaranty or
otherwise, and any and all renewals of, extensions of or substitutes therefor.
The word "Obligations" shall include, BUT NOT BE LIMITED TO, all indebtedness
owed by Borrower to Bank by reason of credit extended or to be extended to
Borrower in the principal amount of $18,350,000.00, pursuant to a certain Loan
and Security Agreement dated of even date herewith, by and between Borrower,
McInnes Services, Inc., Debtor and the Bank, together with all amendments or
modifications thereto or restatements thereof from time to time (the "Loan
Agreement") and one or more instruments of indebtedness and related documents.
Guarantor hereby promises that if one or more of the Obligations are not paid
promptly when due, Guarantor will, upon request of Bank, pay the Obligations to
Bank, irrespective of any action or lack of action on Bank's part in connection
with the acquisition, perfection, possession, enforcement or disposition of any
or all Obligations or any or all security therefor or otherwise, and further
irrespective of any invalidity in any or all Obligations, the unenforceability
thereof or the insufficiency, invalidity or unenforceability of any security
therefor.
Guarantor waives notice of any and all acceptances of this Continuing Guaranty
Unlimited ("Guaranty"). This Guaranty is a continuing guaranty, and, in
addition to covering all present Obligations of Borrower to Bank, will
<PAGE> 2
extend to all future Obligations of Borrower to Bank, whether such Obligations
are reduced, amended, or entirely extinguished and thereafter increased or
reincurred. This Guaranty is made and will remain in effect until the
Obligations are paid in full and until the Borrower has no right to request
further advances under the documents or instruments evidencing the Obligations.
Bank's rights hereunder shall be reinstated and revived, and this Guaranty
shall be fully enforceable, with respect to any amount at any time paid on
account of the Obligations which thereafter shall be required to be restored or
returned by Bank upon the bankruptcy, insolvency or reorganization of Borrower,
Guarantor, or any other person, or as a result of any other fact or
circumstance, all as though such amount had not been paid.
In the event Guarantor at any time shall pay any sums on account of any
Obligations or take any other action in performance of any Obligations,
Guarantor shall be subrogated to the rights, powers, privileges and remedies of
the Borrower in respect of such Obligations; provided that all such rights of
subrogation and all claims and indebtedness arising therefrom shall be, and
Guarantor hereby agrees that the same are, and shall be at all times, in all
respects subordinate and junior to all Obligations, and provided, further, that
Guarantor hereby agrees that Guarantor shall not seek to exercise any such
rights of subrogation, reimbursement, exoneration, or indemnity whatsoever or
any rights of recourse to any security for any of the Obligations unless or
until all Obligations shall have been indefeasibly paid in full in cash and
duly and fully performed.
Guarantor waives presentment, demand, protest, notice of protest and notice of
dishonor or other nonpayment of any and all Obligations and further waives
notice of sale or other disposition of any collateral or security now held or
hereafter acquired by Bank. Guarantor agrees that no extension of time, whether
one or more, nor any other indulgence granted by Bank to Borrower, or to
Guarantor, and no omission or delay on Bank's part in exercising any right
against, or in taking any action to collect from or pursue Bank's remedies
against Borrower or Guarantor, or any of them, will release, discharge or
modify the duties of Guarantor. Guarantor agrees that Bank may, without notice
to or further consent from Guarantor, release or modify any collateral,
security or other guaranties now held or hereafter acquired, or substitute
other collateral, security or other guaranties, and no such action will
release, discharge or modify the duties of Guarantor hereunder. Guarantor
further agrees that Bank will not be required to pursue or exhaust any of its
rights or remedies against Borrower or Guarantor, or any of them, with respect
to payment of any of the Obligations, or to pursue, exhaust or preserve any of
its rights or remedies with respect to any collateral, security or other
guaranties given to secure the Obligations, or to take any action of any sort,
prior to demanding payment from or pursuing its remedies against Guarantor.
In addition to its other obligations set forth in this Guaranty, Guarantor
shall cause Borrower and McInnes Services, Inc. on a consolidated basis, to
maintain at all times a "Tangible Net Worth" (as defined in the Loan Agreement)
of, at minimum, the amounts as of the dates specified in Section 6.14 of the
Loan Agreement. If at any time during the term of this Guaranty, the Tangible
Net Worth of Borrower and McInnes Services, Inc., on a consolidated basis,
shall be below the minimum amounts during the applicable time periods set
forth in Section 6.14 of the Loan Agreement, Guarantor agrees, in each such
instance, without notice or demand of any kind, within thirty (30) days of the
last day of the month in which the Tangible Net Worth does not meet such
minimum amounts, to contribute to McInnes Steel Company's shareholders' equity
in the form of common stock or preferred stock, in form and substance
satisfactory to the Bank, the amount necessary to bring the Tangible Net Worth
in compliance with Section 6.14 of the Loan Agreement.
Guarantor agrees that any legal suit, action or proceeding arising out of or
relating to this Guaranty may be instituted in a state or federal court of
appropriate subject matter jurisdiction in the State of Ohio; waives any
objection which Guarantor may have now or acquire hereafter to the venue of any
such suit, action or proceeding; and irrevocably submits to the jurisdiction of
any such court in any such suit, action or proceeding.
-2-
<PAGE> 3
WAIVER OF RIGHT TO TRIAL BY JURY
GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS GUARANTY OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH,
OR (2) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF
GUARANTOR OR BANK WITH RESPECT TO THIS GUARANTY OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE
TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND
GUARANTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT
GUARANTOR OR BANK MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF GUARANTOR TO THE WAIVER OF
THE RIGHT OF GUARANTOR TO TRIAL BY JURY.
Guarantor hereby authorizes any attorney at law to appear for Guarantor in any
action on any or all Obligations guaranteed hereby at any time after such
Obligations become due, whether by acceleration or otherwise, in any court of
record in or of the State of Ohio or elsewhere, to waive the issuing and
service of process against, and confess judgment against Guarantor in favor of
Bank for the amount that may be due, including interest, late charges,
collection costs, attorneys' fees and the like as provided for in said
Obligations, and costs of suit, and to waive and release all errors in said
proceedings and judgments, and all petitions in error and rights of appeal from
the judgments rendered.
If any Obligation of Borrower is assigned by Bank, this Guaranty will inure to
the benefit of Bank's assignee, and to the benefit of any subsequent assignee,
to the extent of the assignment or assignments, provided that no assignment
will operate to relieve Guarantor from any duty to Bank hereunder with respect
to any unassigned Obligation. In the event that any one or more of the
provisions contained in this Guaranty or any application thereof shall be
determined to be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and any other applications thereof shall not in any way be affected or
impaired thereby. This Guaranty shall be construed in accordance with the law
of the State of Ohio.
The liabilities evidenced hereby may from time to time be evidenced by another
guaranty or guaranties given in substitution or reaffirmation hereof. Any
security interest or mortgage which secures the liabilities evidenced hereby
shall remain in full force and effect notwithstanding any such substitution or
reaffirmation.
If at the time of payment of the Obligations and any discharge hereof,
Guarantor shall be then directly or contingently liable to Bank as maker,
indorser, surety or guarantor of any other loan or obligation whether the same
shall be evidenced by a note, bill of exchange, agreement of guaranty or other
instrument, then Bank may continue to hold any collateral of Guarantor as
security therefor, even though this Guaranty shall have been surrendered to
Guarantor. Bank shall not be bound to take any steps necessary to preserve any
rights in the collateral against prior parties. If any Obligations hereunder
are not paid when due, Bank may, at its option, demand, sue for, collect or
make any compromise or settlement it deems desirable with reference to any
collateral, and shall have the rights of a secured party under the law of the
State of Ohio. Guarantor shall be liable for any deficiency.
-3-
<PAGE> 4
Executed and delivered at Columbus, Ohio, this 29th day of February, 1996.
GUARANTOR:
CENTRUM INDUSTRIES, INC.
By: /s/ George H. Wells
-----------------------
Its: President
-----------------------
WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE
AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY
BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS
OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY
CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED
GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
AGREEMENT, OR ANY OTHER CAUSE.
-4-
<PAGE> 1
EXHIBIT 10.11
WARRANT
For good and valuable consideration receipt of which is hereby acknowledged,
Maker hereby agrees as part of this Promissory Note to establish a Warrant in
the name of the Creditor for the right to purchase authorized but as yet
unissued common stock in the Maker. For each Unit as defined in the
Confidential Private Placement Memorandum dated February 23, 1993, the
"Memorandum" (being a $10,000 Promissory Note), Creditor shall receive one
Warrant to purchase one thousand (1,000) shares of authorized but as yet
unissued shares of common stock in Maker at a purchase price of One Dollar ($1)
per share. Said shares will be issued from authorized but as yet unissued
shares of common stock and will be subject to "Restrictions on Transferability"
as defined in the Memorandum.
This Warrant shall be a part of this Promissory Note and shall not be
severable.
This Warrant shall be exercisable at the sole decision of the Creditor at any
time during the period of this Promissory Note, renewal or rerenewal thereof.
Creditor shall exercise the Warrant by giving Maker a check in the amount of
One Thousand Dollars ($1,000) along with written instructions that the Warrant
is being exercised.
Maker shall thereafter issue as soon as possible the share certificate in the
name of the Creditor.
CENTRUM INDUSTRIES, INC.
By: ___________________________
Title: _________________________
<PAGE> 1
EXHIBIT 10.12
LOAN AGREEMENT
THIS LOAN AGREEMENT is made and entered into on this 2nd day of
November, 1995, by and between the CITY OF ERIE by and through the ENTERPRISE
DEVELOPMENT ZONE REVOLVING LOAN FUND, (hereinafter, the "Lender") and MCINNES
STEEL COMPANY, with its principal place of business located at 441 East Main
Street, Corry, Pennsylvania 16407 (hereinafter, the "Borrower").
1. The Borrower desires to borrow from the Lender the sum of
Three Hundred Forty-Nine Thousand Five Hundred and no/100 ($349,500.00) Dollars
for use in the conduct of its business known as MCINNES ROLLED RINGS, 1533 BAST
12TH STREET, ERIE, PA 16511, A DIVISION OF MCINNES STEEL COMPANY.
2. Lender has determined that it will lend to Borrower, a
qualifying entity, the sum of Three Hundred Forty-Nine Thousand Five Hundred
and no/100 ($349,500.00) Dollars.
3. The loan of Three Hundred Forty-Nine Thousand Five Hundred and
no/100 ($349,500.00) Dollars to the Borrower on the date hereof as a qualifying
business concern shall be made in accordance with the terms and conditions of
this Agreement, a Promissory Note (a copy of which is attached hereto as
Exhibit A) (the "Note"), a Mortgage on the land and buildings located at 1533
East 12th Street, Erie, PA 16511, and in reliance upon the representations and
warranties of the Borrower set forth herein.
4. This Agreement, the Note and Mortgage (collectively the "Loan
Documents") are hereby incorporated by reference.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and intending to be legally bound hereby, the Lender and the Borrower
agree to the following:
I. THE LOAN
1. Subject to the terms and conditions contained in the Loan
Documents and in reliance upon the representations and warranties of the
Borrower set forth therein, the Lender agrees to make and the Borrower agrees
to accept the Loan, the proceeds of which shall be disbursed by the Lender to
the Borrower on the date of the execution of the Note and Mortgage.
2. The principal balance of the Loan and interest thereon shall
be paid by the Borrower to the Lender in the manner provided in the Note.
3. The loan shall bear and Borrower shall pay Lender interest at
the rate of three (3%) percent per annum.
<PAGE> 2
4. The loan, including interest established pursuant to Paragraph
3, immediately above, shall be amortized over a period of eighty-four (84)
months.
II. THE COLLATERAL
1. As security for payment of the Note and all other charges
associated therewith, the Borrower hereby grants to the Lender a continuing
security interest in all of the machinery and equipment of McInnes Steel
Company located in Erie or Corry. The security interest shall be a second lien
on the machinery and equipment.
2. As additional security for payment of the Note and all
interest and other charges associated therewith, the Borrower hereby grants to
the Lender a mortgage on the land and buildings located at 1533 East 12th
Street, Erie, PA 16511. This mortgage lien will be junior in lien priority and
distribution to liens of PNC Bank, or successor Lender, and the Pennsylvania
Industrial Development Authority.
3. The Borrower agrees to execute any and all documents that
shall be necessary or desirable, from time to time, to create, perfect,
continue, or maintain the security interest of the Lender in the Collateral.
4. The Lender will have all rights with respect to the security
interest in the Collateral as are provided under the Uniform Commercial Code.
5. The Borrower shall obtain property insurance in the minimum
amount of Three Hundred Forty-Nine Thousand Five Hundred and no/100
($349,500.00) Dollars on both the personal and real property described above.
The insurance policy(ies) shall identify the City of Erie as a loss payee.
III. REPRESENTATIONS AND WARRANTIES
1. As an inducement for the Lender to make the Loan, the Borrower
represents and warrants to the Lender the following:
(a) The Borrower is a corporation duly organized and
operating in accordance with the laws of the Commonwealth of Pennsylvania.
(b) No other persons or entities have an ownership
interest in the Borrower.
(c) The execution, delivery and performance by the
Borrower of the Loan Documents is within power of the Borrower.
(d) The execution, delivery and performance of the Loan
Documents will not violate any provision of law, any order of any
<PAGE> 3
court or other agency or government, any provisions of any agreement, or other
instrument to which the Borrower is a party or by which it or any of its assets
are bound, or conflict with, result in a breach of, or constitute a default
under any agreement or other instrument binding upon the Borrower, or result in
the creation or imposition of any lien, charge, or encumbrance of any nature
upon any of the assets of the Borrower, other than those in favor of the Lender
arising out of the Loan Documents.
(e) The Loan Documents, when duly executed, will be valid
and binding obligations of the Borrower which are fully enforceable in
accordance with their terms.
(f) There is no action, suit, examination, review or
proceeding by or before any court of law, governmental instrumentality, or
agency now pending or, to the knowledge of the Borrower, threatened against the
Borrower, or against any of its assets or rights, which if adversely
determined, would materially impair its right to carry on business as now being
conducted or contemplated or which would materially adversely affect its
financial condition.
(g) The Borrower has filed, or caused to be filed, all
federal, state and local tax returns which are required to be filed, and has
paid all taxes as are shown on such returns, or in any assessment received by
it, to the extent that such taxes have become due.
(h) The Borrower has all licenses, franchises, consents,
permits, approvals and authorizations required in connection with the conduct
of its business as now being conducted or contemplated; and they are in full
force and effect without any modification, amendment, or revocation which would
materially adversely affect the conduct of its business.
(i) The Borrower has no knowledge of any claim or reason
to believe that it is or may be infringing on or otherwise acting adversely to
the rights of any person under or in respect of any patent, trademark, service
mark, trade name, copyright, license, or other similar intangible right.
(j) All oral and written information which has been
provided by the Borrower does not contain any untrue statement of a material
fact or does not omit a material fact that is necessary to make the information
true and not misleading.
2. Borrower shall make no loans to its shareholders, employees or
officers until the debt created hereby is paid in full or until Lender gives
its prior written approval.
3. The representations and warranties set forth herein shall
survive the execution of this Agreement, the making of the Loan and will
continue in full force and effect for the entire term of this Agreement after
the delivery of the Loan Documents and until the
<PAGE> 4
Loan and all remaining obligations are paid in full by the Borrower.
IV. AFFIRMATIVE COVENANTS
1. During the term of this Agreement and until repayment in full
of the Loan and all remaining obligations by the Borrower, including all
interest and other charges associated therewith, the Borrower agrees as
follows:
(a) Upon the request of the Lender, the Borrower will be
required to submit various financial information pertaining to the Borrower
including, but not limited to, an income statement, a balance sheet and a
statement of changes in financial position, all of which are prepared in
accordance with generally accepted accounting principles consistently followed
throughout the periods involved, which financial information the Lender may
require to be certified in accordance with generally accepted accounting
principles by an independent certified public accountant, selected by the
Borrower and satisfactory to the Lender.
(b) The Borrower will maintain, with financially sound
and reputable insurers, appropriate amounts of insurance to protect its
properties, the Collateral and the Borrower's business against losses or
damages of the kind customarily insured by corporations or businesses similarly
situated to that of the Borrower including, but not limited to, adequate fire
and extended coverage, insurance, business interruption insurance, necessary
workers' compensation insurance, products liability insurance and such other
insurance as may be reasonably required by law or as may be reasonably required
in writing by the Lender; and the Lender shall be named as the insured or loss
payee with respect to all of the foregoing insurance. The Borrower will, upon
request, furnish to the Lender a schedule of all insurance it carries setting
forth in detail the amount and type of such insurance.
(c) The Borrower will maintain in good condition, repair
and working order, all properties used or useful in its business including, but
not limited to, the Collateral.
(d) The Borrower will pay all debts incurred in the
ordinary course of business and other obligations in accordance with normal
terms or any applicable grace periods or duly contest the obligation pursuant
to any applicable law or statute. The Borrower will pay all taxes, assessments
and other governmental charges levied upon any of its properties or assets or
in respect to its franchises, business, income or profits before it becomes
delinquent or duly contest the obligation pursuant to any applicable law or
statute.
(e) The Borrower will promptly notify the Lender in
writing of any event or material adverse change in the condition,
<PAGE> 5
operations, business, financial or otherwise, of the Borrower which, if
existing at the date hereof, would require qualification of the representations
and warranties set forth herein.
(f) The Borrower will make available for inspection by
the lender its books, computer software programs, records and properties when
reasonably requested to do so and will promptly furnish the Lender with such
information regarding its business operations and financial condition as the
Lender may request, all of which shall be maintained by the Lender in
confidence.
V. NEGATIVE COVENANTS
1. The Borrower agrees that during the term of this Agreement and
until repayment in full of the Loan and all remaining obligations by the
Borrower, including all interest and other charges associated therewith,
without the prior written consent of the Lender:
(a) The Borrower will not, directly or indirectly,
purchase, sell, lease, sublease, transfer or otherwise dispose of its
properties or assets for less than full and adequate consideration.
(b) Except as expressly permitted herein, the Borrower
will not pay any bonus or additional compensation to any related person in
excess of amounts in effect as of the date of this Agreement, except any bonus
or additional compensation which would not in the aggregate materially impair
the financial condition of the Borrower.
(c) The Borrower will not undertake any merger,
consolidation, liquidation, dissolution, incorporation, or change in existence,
structure, or ownership.
VI. EVENTS OF DEFAULT
1. The occurrence of any one or more of the following events
shall constitute an event of default ("Event of Default") under this Agreement:
(a) If the Borrower fails to pay any installment of
interest or principal under the Note within ten (10) days after such payment
becomes due;
(b) If any representation or warranty made herein by the
Borrower or any other oral information, written statement, certificate, product
report, or financial statement at any time furnished by or for the Borrower in
connection herewith, proves to be false or erroneous in any material respect
when made;
<PAGE> 6
(c) If the Borrower fails to perform or observe any other
provision, covenant, or agreement contained in this Agreement (other than
mentioned in subparagraph (a) hereof) or in the remaining Loan Documents and
such failure remains unremedied for twenty (20) days after the Lender has given
written notice to the Borrower to cure the same;
(d) If the Borrower discontinues business, or if there
occurs a material adverse change in the business, properties, or the condition
or operations, financial or otherwise, of the Borrower which continues
unremedied for twenty (20) days after the Lender has given written notice to
the Borrower;
(e) If the Borrower is adjudicated as bankrupt or
insolvent, or ceases, is unable, or admits in writing its inability to pay its
debts as they mature, or makes an appointment for the benefit of its creditors;
(f) If the Borrower applies for, or consents to, the
appointment of any receiver, trustee, or similar officer for it or for all or
any substantial part of its property, or any such receiver, trustee, or similar
officer is appointed without the application or consent of the Borrower and
such appointment continues thereafter undischarged for a period of twenty (20)
days, or if the Borrower institutes, or consents to the institution of (by
petition, application, answer, consent or otherwise), any bankruptcy,
insolvency, reorganization, arrangement, readjustment of debt, dissolution,
liquidation, or similar proceeding relating to it under the laws of any
jurisdiction, or if any such proceeding is instituted against the Borrower and
remains thereafter unstayed or undismissed for a period of twenty (20) days; or
(g) Any judgment, writ, warrant of attachment or
execution or similar process is issued or levied against a substantial part of
the property of the Borrower and such judgment, writ or similar process is not
released, vacated, or fully bonded within twenty (20) days after its issue or
levy.
VII. REMEDIES UPON DEFAULT
1. If an Event of Default shall occur, the Lender shall have the
following rights:
(a) In the event that one or more of the Events of
Default set forth in Article VI, Paragraph 1, subparagraphs (a) through (d)
hereof occurs and is not waived by the Lender, then, in any such event, and at
any time thereafter, the Lender may, at its option, terminate the Loan
Agreement and declare the unpaid principal of, and all interest and other
charges, if any, then accrued on, the Note and any other liabilities hereunder,
and all other indebtedness of the Borrower to the Lender immediately due and
payable in full, without presentment, demand, protest, or other
<PAGE> 7
notice of any kind, all of which the Borrower hereby expressly waives.
(b) Upon the happening of an Event of Default referred to
in Article VI, Paragraph 1, subparagraphs (e) through (g) hereof, the Note and
all other obligations of the Borrower to the Lender then existing will become
immediately due and payable in full, without presentment, demand, protest or
notice of any kind, all of which the Borrower hereby expressly waives.
(c) The remedies in this Article are in addition to, not
in limitation of, any other right, power, or remedy, either in law, in equity
or otherwise, to which the Lender may be entitled. No failure or delay on the
part of the Lender in exercising any right, power or remedy will operate as a
waiver thereof, nor will any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other rights the
Lender may have.
VIII. MISCELLANEOUS
1. No waiver of any provision of the Loan Documents or consent to
departures therefrom, is effective unless made in writing and signed by the
Lender. No such consent or waiver extends beyond the particular case and
purpose involved. No notice or demand given in any case constitutes a waiver of
the right to take other action in the same, similar or instances without such
notice or demand. No amendment of this Agreement is effective unless made in
writing and signed by the Borrower and the Lender.
2. The Borrower agrees to pay all costs and expenses in
connection with the preparation, execution, delivery and administration of the
Loan Documents, as well as such legal fees and expenses incurred in connection
with the enforcement of the Loan Documents.
3. The Loan Documents will be governed and construed in
accordance with the laws of the Commonwealth of Pennsylvania. Headings and
titles herein are for convenience only and will not influence the construction
or interpretation of the terms of this Agreement. The Borrower expressly agrees
to venue and personal jurisdiction in Erie County, Pennsylvania.
4. All written communications must be addressed to the Lender or
to the Borrower, as the case may be, at their respective addresses set forth
above or at such other address as either party may designate to the other in
writing. Such communications will be effective upon deposit in the United
States mail by certified mail, properly addressed with postage prepaid.
5. All agreements, representations, warranties and covenants made
by the Borrower and the Shareholder will survive the making of the Loan
hereunder and will bind the parties, their successors and
<PAGE> 8
assigns, and inure to the benefit of the parties and their respective
successors and assigns.
6. If any provision of this Loan Agreement, or any covenant,
stipulation, obligation, agreement, act, or action made, assumed, entered into,
or taken is for any reason held to be illegal or invalid in any jurisdiction,
such a legality or invalidity shall not affect any provision or any other
covenant, stipulation, obligation, agreement, act, or action made, assumed,
entered into, or taken, each of which shall be construed and enforced as if
such a legal or invalid portion were not contained herein and shall not affect
the enforceability of that provision in any other jurisdiction.
IN WITNESS WHEREOF, this Loan Agreement is executed and sealed by the
parties on the day and year first above written.
CITY OF ERIE, by and through the
ENTERPRISE DEVELOPMENT ZONE
REVOLVING LOAN FUND
Attest:
By: /s/ Joyce A. Savacchia
----------------------------
/s/ James Klemm Mayor
- --------------------------------
City Clerk
By: /s/ Brenda A. Pundt
----------------------------
City Controller
BORROWER
MCINNES STEEL COMPANY
Attest:
By: Timothy M. Hunter, Treasurer
/s/ James E. Spoden, Asst. Secy. ----------------------------
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EXHIBIT 10.14
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made this 29th day of February, 1996, by and between
MCINNES STEEL COMPANY, a Pennsylvania corporation (hereinafter called
"Corporation") whose principal place of business is located at 441 E. Main
Street, Corry, Pennsylvania 16407, and ANTHONY A. MONTANI (hereafter called
"Employee"), an individual residing at 691 Wayne Street, Corry, Pennsylvania
16407.
WITNESSETH:
WHEREAS, Centrum Industries, Inc., a Delaware corporation ("Centrum"),
Employee, and other stockholders are parties to an Agreement and Plan of
Reorganization (hereafter referred to as the "Acquisition Agreement"), dated
December 5, 1995, as amended February 5, 1996, pursuant to which a subsidiary
of Centrum is to be merged into the Corporation; and
WHEREAS, Employee owns a substantial portion of the outstanding
capital stock of the Corporation and will receive direct financial benefits
from the consummation of the transactions set forth in the Acquisition
Agreement; and
WHEREAS, as a material and significant inducement to Centrum to enter
into and consummate the transactions set forth in the Acquisition Agreement,
Employee has agreed to remain in employment of the Corporation and assist
Centrum in matters relating to the change of ownership contemplated by the
Acquisition Agreement; and
WHEREAS, Employee has extensive experience and abilities which are
valuable to Centrum in assisting in the operation of the Corporation; and
WHEREAS, Centrum is desirous of having Employee employed with the
Corporation upon the terms and conditions of this Agreement, which terms and
conditions are agreeable to Employee.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and intending to be legally bound thereby, the parties agree as
follows:
1. EMPLOYMENT. For a term of three (3) years commencing February
29, 1996, and ending on February 28, 1999, the Corporation agrees to employ
Employee, and Employee agrees to serve the Corporation. During the term of his
employment, Employee shall, on a full-time basis, devote his full time,
attention and energies to the business of the Corporation; shall render
efficient, industrious and loyal services; and shall assume and perform such
responsibilities and duties in connection therewith as may be assigned to him
from time to time by the Chairman of the Board of the Corporation (hereinafter
called the "Chairman") as more particularly described in Paragraph 2 hereof.
Termination of Employee's employment for cause, as provided in Paragraph 7 of
this Agreement, or a voluntary termination by Employee, shall constitute a
failure of Employee to comply with the terms of this paragraph. Subject to
termination as hereinafter provided, this Agreement shall be automatically
renewed from year to year on the anniversary day of each year ensuing
thereafter commencing upon the expiration of the three year term of this
Agreement, unless within thirty (30) days prior to any such
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renewal date, either party to this Agreement shall notify the other in writing
that this Agreement shall terminate and end at the close of the then current
employment term.
2. DUTIES. Employee shall initially serve as President and Chief
Operating Officer of the Corporation and shall render such services as are
necessary to carry out the duties of said position and such additional duties
of an executive nature as may be assigned to him from time to time by the
Chairman.
3. COMPENSATION. During Employee's employment under this
Agreement, the Corporation agrees to pay Employee compensation of an annual
salary equal to the sum of One Hundred Forty Thousand Dollars ($140,000.00),
such salary to be increased annually as determined by the Board of Directors
and in no event less than the greater of: (x) the change in the Consumer Price
Index for Urban Wage Earners and Clerical Workers (1982-1984=100), or (y) four
percent (4%) per year.
4. EXPENSES.
(a) During the term of this Agreement, Employee shall be
entitled to continue to use at no additional expense the company car currently
driven by Employee or a similar replacement vehicle at the expiration of the
current car lease, consistent with the Corporation's practices currently in
effect. Employee shall be reimbursed for all reasonable expenses incurred in
the operation and maintenance of such car consistent with the Corporation
reimbursement procedures and practices currently in effect.
(b) The Corporation will reimburse Employee for all
reasonable and necessary expenses, including without limiting the foregoing,
travel, entertainment, and promotional expenses, incurred by Employee in
carrying out his duties under this Agreement upon the presentation to the
Corporation by Employee from time to time of an itemized account of such
expenses in such form as may be required by the Corporation.
5. FRINGE BENEFITS. During the period of his employment,
Employee shall be afforded the right to participate in any and all group
insurance, medical and health care plans and other employee benefit plans as
are generally made available to other employees of the Corporation and the
right to participate in the profit-sharing plans and stock option plans of
Centrum consistent with executives of other Centrum companies. Copies of all
such Centrum executive profit sharing plans and stock option plans, or an
appropriate detailed description of such plans has been provided to the
Employee as of the date of this Agreement. Employee shall be entitled to five
(5) weeks and one (1) personal day of paid vacation leave during each one (1)
year period of the term of this Agreement, the scheduling of which shall be
subject to the approval of the Chairman.
In addition to the foregoing fringe benefits, Employee shall be
entitled to participate in:
(a) a medical reimbursement plan for senior executives
which shall supplement the Corporation's medical and health care plans
available to other employees to reimburse Employee for medical and other health
care costs not otherwise covered by such group plans, in an amount not to
exceed Three Thousand Five Hundred Dollars ($3,500.00) per year.
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(b) Corporation-sponsored whole life insurance contract
in the amount of One Hundred Thousand Dollars ($100,000.00).
(c) payment for annual dues, membership fees and
assessments for the Aviation Country Club and the Corry Country Club.
(d) executive tax return preparation.
(e) continued participation in the Nonqualified Deferred
Compensation Agreement entered into as of December 31, 1988, in connection with
the termination of the McInnes Steel Company Salaried Employees' Defined
Pension Plan (it being understood that the Corporation is not assuming any
additional obligations other than as expressly provided for in the Nonqualified
Deferred Compensation Agreement).
(f) such sick leave, sick pay and disability benefits in
accordance with the Corporation's existing policy for key executive employees.
Pursuant to the Centrum Stock Option Plan (the "Plan"), Centrum will
grant to the Employee a stock option (the "Option"), intending to qualify as a
nonqualified option or (as described in Treas.Reg. Section 1.83-7 or any
successor regulation thereto), to purchase one hundred fifty thousand (150,000)
shares of Centrum Common Stock, Five Cents ($.05) par value per share (the
"Common Stock"), at a purchase price of One and 50/100 Dollars ($1.50) per
share, with seventy-five thousand (75,000) shares to vest after one (1) year of
the term of this Agreement and the balance of the shares to vest after two (2)
years of the term of this Agreement, all as provided in the Plan and Stock
Option Agreement entered into on the date hereof between Centrum and the
Employee; provided, however, in the event that Employee's employment with the
Corporation is terminated other than for cause prior to the first anniversary
of the term of this Agreement, options for seventy-five thousand (75,000)
shares shall vest in Employee.
6. ILLNESS, OTHER MEDICAL DISABILITY OR DEATH. If Employee
should be prevented from performing his duties by reason of incapacity or
disability for a period of six (6) months or more, service and compensation
(other than that which shall have accrued and remains unpaid) under this
Agreement will cease. When such illness or other medical disability has ended,
Employee shall resume his duties under this Agreement and again become entitled
to receive compensation hereunder. Such illness or other medical disability
shall not extend the terms of this Agreement. If Employee should be prevented
from performing his duties by reason of death, the Corporation shall pay any
salary or disability payment due for the month of Employee's death to
Employee's designated beneficiary or surviving spouse, in the order named, or
if none to the personal representative of Employee's estate, as the case may
be, and this Agreement shall be terminated and of no further force and effect
upon such payment.
7. TERMINATION FOR CAUSE. Corporation may discharge Employee at
any time for:
(a) an act of theft; embezzlement or felony related to
his employment duties with the Corporation;
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(b) conviction of a crime of moral turpitude or
dishonesty;
(c) habitual intoxication or drug addiction;
(d) any material violation of any express direction or
any reasonable rule or regulation established by the Corporation from time to
time regarding the conduct of its business; provided that the Employee shall
have received written notice of such failure and a reasonable opportunity to
discuss the matter with the Board of Directors, followed by a reasonable
opportunity for the Employee to correct his failure and comply with such rule
of the Board of Directors, or any act or omission constituting gross misconduct
which is or is intended to be injurious to the Corporation;
(e) the willful failure of Employee to perform his duties
hereunder; or
(f) any material violation by Employee of the terms and
conditions of this Agreement or any other agreement between the Corporation and
Employee,
in which event the Corporation shall have no further obligations or liabilities
hereunder after the date of such discharge, other than payment of salary,
bonus,or fringe benefits, the rights to which have accrued and remain unpaid.
8. SEVERANCE PAYMENTS. Upon the concurrence of a "Severance
Event" as hereafter defined, the Corporation shall continue to pay to Employee
for the Severance Period the monthly base salary Employee was receiving from
the Corporation immediately prior to the occurrence of such Severance Event;
provided, however, such severance payments to Employee shall be reduced by any
salary or consulting income received by Employee from any source during the
Severance Period. In the event Employee breaches any provision of this
Agreement, all obligations of the Corporation to make severance payments to
Employee pursuant to this Agreement shall cease. For purposes of this
Agreement, a "Severance Event" shall mean: (i) the termination of Employee's
employment with the Corporation by the Corporation other than a termination for
cause as provided for in paragraph 7 hereof; or (ii) the failure of the parties
to renew this Agreement at the expiration of the term specified herein or at
the expiration of any subsequent term agreed to by the parties. The "Severance
Period" shall mean a period of time equal to the remaining term of this
Agreement following a Severance Event; provided, however, in no event shall the
Severance Period be less than one (1) year.
9. NON-COMPETITION, TRADE SECRETS, ETC. As an inducement to the
Corporation to execute this Agreement,
(a) Employee covenants and agrees with the Corporation that at
all times during the term of his employment hereunder, including extensions
thereof, and for a term equal to one (1) year following his termination of
employment with the Corporation or any of its subsidiaries (the "Restrictive
Period"), within the area where the Corporation presently does business
(including, without limitation, the United States east of the Mississippi
River, the Canadian provinces of Ontario and Quebec, China and Japan), and
where the Corporation does business at the time of termination of Employee (the
"Restrictive Area"), he shall not directly or indirectly:
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(i) solicit, induce or encourage any employee of the
Corporation or any of its subsidiaries to terminate his or her relationship
with the Corporation or any of its subsidiaries; or
(ii) employ or establish a business relationship
which is competitive with the Corporation or any of its subsidiaries with any
individual who was employed by the Corporation or any of its subsidiaries
during the preceding twelve (12) month period; or
(iii) encourage or assist any individual or entity
in a business which is competitive with the Corporation or any of its
subsidiaries to employ or establish a business relationship with any individual
who was employed by the Corporation or any of its subsidiaries during the
preceding twelve (12) month period; or
(iv) solicit, induce or encourage any suppliers,
customers or prospective customers to terminate or reduce in scope their
relationship with the Corporation or any of its subsidiaries; or
(v) solicit or assist any individual or entity in the
solicitation of business from, or performance of work for, any customers or
prospective customers of the Corporation; or
(vi) engage in (as a principal, agent, consultant,
partner, director, officer, employee, stockholder, investor or otherwise),
alone or in association with any person or entity, or be financially interested
in, any business which is competitive with the Corporation. Notwithstanding the
foregoing, Employee shall be entitled to hold shares of a publicly-traded
company so long as such shares do not represent more than one percent (1%) of
the outstanding capital of such company.
(b) For purposes of paragraph 9, "customers" shall mean
those customers for whom the Corporation supplied products to or performed
services during the twelve (12) months preceding the date in question, and
"prospective customers" shall mean persons or entities whose business was
solicited by the Corporation during the twelve (12) months preceding the date
in question.
(c) Employee shall not use for his personal benefit, or
disclose, communicate or divulge to, or use for the direct or indirect benefit
of any person, firm, association or company,
(i) any information regarding the business methods,
business policies, business strategies, marketing plans, survey procedures,
statistical techniques, research or development projects or results, trade
secrets or other confidential knowledge or processes of, or developed by, the
Corporation, or
(ii) any confidential data on or relating to past,
present or prospective customers of the Corporation, or
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(iii) budgets, forecasts, pricing information or
unpublished financial information or any other confidential information
relating to or dealing with the business operations or activities of the
Corporation.
(d) Employee acknowledges and agrees that
(i) the covenants set forth herein are essential
elements of the transactions contemplated by the Acquisition Agreement, that
Employee is receiving adequate consideration hereunder, and that such covenants
are reasonable and necessary in order to protect the legitimate interests of
the Corporation;
(ii) the Corporation will not have any adequate remedy
at law if Employee violates the terms hereof or fails to perform any of his
obligations hereunder; and
(iii) the Corporation shall have the right, in addition
to any other rights either may have under applicable law, to obtain from any
court of competent jurisdiction preliminary and permanent injunctive relief to
restrain any breach or threatened breach of, or otherwise to specifically
enforce any such covenant or any other obligations of Employee under this
Agreement, as well as to obtain damages and an equitable accounting of all
earnings, profits and other benefits arising from such violation, which rights
shall be cumulative and in addition to any other rights or remedies to which
the Corporation may be entitled.
(e) If the Restrictive Period or the Restrictive Area set
forth in paragraph 9(a) should be adjudged unreasonable in any proceeding, then
the Restrictive Period shall be reduced by such number of months or the
Restrictive Area shall be reduced by the elimination of such unreasonable
portion thereof, or both, so that such restrictions may be enforceable for such
time and in the manner adjudged to be reasonable. If Employee violates any of
the restrictions contained in paragraph 9(a), then the restrictive period shall
not run in favor of Employee from the time of the commencement of any such
violation until such time as such violation shall be cured by Employee.
10. INFORMATION REGARDING AGREEMENT. During the term of this
Agreement and during the Restrictive Period, Employee shall not make the terms
and conditions of this Agreement known to any business, entity, or persons
engaged in activities competitive with the Corporation's business with which he
becomes associated subsequent to the termination of his employment with the
Corporation prior to his association with any such business, entity or persons.
The Corporation shall have the right to make the terms of this Agreement known
to third persons.
11. RETURN OF COMPANY PROPERTY. At the time of Employee's
termination of employment with the Corporation or upon demand by the
Corporation, whichever is sooner, Employee shall promptly turn over to the
Corporation all files, documents, business records and any other records,
documents, writings of any kind whatsoever, and all assets of any kind
whatsoever, that belong to the Corporation. Employee shall not copy or record
in any manner whatsoever the information contained in the foregoing materials
and shall turn over any copies or recordings of any kind whatsoever containing
information derived directly or indirectly from the aforestated materials.
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12. SURVIVAL OF COVENANTS. The covenants in Sections 9, 10 and 11
and acknowledgments of the Employee set forth in this Agreement shall survive
the termination of this Agreement, regardless of the cause therefor.
13. REMEDIES. In the event of any violation of any of the
covenants contained in Sections 9, 10 or 11, the Corporation shall be
authorized to obtain preliminary and permanent injunctive relief as well as an
equitable accounting of any profits or benefits arising out of such violation,
which rights and remedies shall be cumulative and in addition to any other
rights or remedies to which the Corporation may be entitled. In the event of
the violation of any of the restrictions contained in Sections 9, 10 or 11, the
period, if any, therein specified shall abate during the time of violation
thereof and that portion remaining at the time of commencement of any violation
shall not begin to run until such violation has been fully and finally cured.
14. WAIVER. The waiver by the Corporation of the breach of any
provision of this Agreement by Employee shall not operate or be construed as a
waiver of any subsequent breach by it. No waiver by the Corporation shall be
legally operative unless reduced to writing and executed by the President of
the Corporation.
15. NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered if delivered personally or by recognized
overnight courier service or by facsimile to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice, except that notices of changes of address shall be effective upon
receipt):
(i) If to Employee:
Anthony A. Montani
691 Wayne Street
Corry, Pennsylvania 16407
with a COPY, given in the manner prescribed above, to:
James E. Spoden, Esq.
MacDonald, Illig, Jones & Britton
100 State Street
Suite 700
Erie, Pennsylvania 16507
Fax No.: (814) 454-4647
(ii) If to Corporation:
McInnes Steel Company
441 E. Main Street
Corry, Pennsylvania 16407
Attn: President
Fax No.: (814) 664-9452
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and
Centrum Industries, Inc.
6135 Trust Drive
Suite 104A
Holland, Ohio 43528
Attention: George H. Wells, President
and Chief Operating Officer
Fax No.: (419) 868-3442
with a COPY, given in the manner prescribed above, to:
John W. Hilbert, II, Esq.
Fuller & Henry P.L.L.
One SeaGate, Suite 1700
P.O. Box 2088
Toledo, Ohio 43603-2088
Fax No.: (419) 247-2665
16. ENTIRE AGREEMENT; AMENDMENT OR TERMINATION; WAIVER. This
Agreement (and Plan and Option Agreement referred to herein) constitutes the
entire agreement between the parties hereto with respect to the subject matter
hereof. This Agreement may not be amended or terminated except by a written
instrument, signed by each of the parties hereto, expressing such amendment or
termination. No failure on the part of any party to exercise and no delay in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or remedy
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or remedy.
17. GENERAL TERMS. This Agreement is personal in nature and
(a) neither of the parties hereto shall assign or transfer
this Agreement without the written consent of the other, except that the
Corporation may assign or transfer this Agreement
(i) to any successor corporation in the event of
merger, consolidation or transfer or sale of the business of the Corporation in
which Employee is engaged; or
(ii) to a parent or subsidiary corporation which may be
organized to conduct the business of the Corporation, in which Employee is
engaged.
(b) In any of the aforesaid events, Employee shall remain
liable to the Corporation, or its successor and assignees.
18. HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
19. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania;
provided, however, that if any
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provision of this Agreement shall be deemed invalid or unenforceable under the
laws of the Commonwealth of Pennsylvania, this Agreement shall be governed by,
and construed in accordance with, the laws of the State of Ohio.
20. COUNTERPARTS. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Corporation has caused its appropriate officer
to sign this Agreement, and Employee has signed this Agreement.
MCINNES STEEL COMPANY
By /s/ George H. Wells
--------------------------
EMPLOYEE
/s/ Anthony A. Montani
------------------------------
WITNESS: ANTHONY A. MONTANI
/s/ John D. Gillespie /s/ James E. Spoden
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EXHIBIT 10.15
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made this 29th day of February, 1996, by and between
MCINNES STEEL COMPANY, a Pennsylvania corporation (hereinafter called
"Corporation") whose principal place of business is located at 441 E. Main
Street, Corry, Pennsylvania 16407, and TIMOTHY M. HUNTER (hereinafter called
"Employee") an individual residing at 4138 Mountain Laurel Drive, Erie,
Pennsylvania 16510.
WITNESSETH:
WHEREAS, Centrum Industries, Inc., a Delaware corporation ("Centrum"),
Employee, and other stockholders are parties to an Agreement and Plan of
Reorganization (hereafter referred to as the "Acquisition Agreement"), dated
December 5, 1995, as amended February 5, 1996 pursuant to which a subsidiary of
Centrum is to be merged into the Corporation; and
WHEREAS, Employee owns a portion of the outstanding capital stock of
the Corporation directly and as a participant in the Corporation's Employee
Stock Ownership Plan and will receive direct financial benefits from the
consummation of the transactions set forth in the Acquisition Agreement; and
WHEREAS, as a material and significant inducement to Centrum to enter
into and consummate the transactions set forth in the Acquisition Agreement,
Employee has agreed to remain in employment of the Corporation and assist
Centrum in matters relating to the change of ownership contemplated by the
Acquisition Agreement; and
WHEREAS, Employee has extensive experience and abilities which are
valuable to Centrum in assisting in the operation of the Corporation; and
WHEREAS, Centrum is desirous of having Employee employed with the
Corporation upon the terms and conditions of this Agreement, which terms and
conditions are agreeable to Employee.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and intending to be legally bound thereby, the parties agree as
follows:
1. EMPLOYMENT. For a term of three (3) years commencing February
29, 1996 1996, and ending on February 28, 1999, the Corporation agrees to
employ Employee, and Employee agrees to serve the Corporation. During the term
of his employment, Employee shall, on a full-time basis, devote his full time,
attention and energies to the business of the Corporation; shall render
efficient, industrious and loyal services; and shall assume and perform such
responsibilities and duties in connection therewith as may be assigned to him
from time to time by the President of the Corporation as more particularly
described in Paragraph 2 hereof. Termination of Employee's employment for
cause, as provided in Paragraph 7 of this Agreement, or a voluntary termination
by Employee, shall constitute a failure of Employee to comply with the terms of
this paragraph. Subject to termination as hereinafter provided, this Agreement
shall be automatically renewed from year to year on the anniversary
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day of each year ensuing thereafter commencing upon the expiration of the three
year term of this Agreement, unless within thirty (30) days prior to any such
renewal date, either party to this Agreement shall notify the other in writing
that this Agreement shall terminate and end at the close of the then current
employment term.
2. DUTIES. Employee shall initially serve as Vice-President and
Chief Financial Officer of the Corporation and shall render such services as
are necessary to carry out the duties of said position and such additional
duties of an executive nature as may be assigned to him from time to time by
the Chairman of the Board of the Corporation (hereinafter called the
"Chairman") or by the President of the Corporation.
3. COMPENSATION. During Employee's employment under this
Agreement, the Corporation agrees to pay Employee compensation of an annual
salary equal to the sum of Ninety Thousand Dollars ($90,000.00), such salary to
be increased annually as determined by the Board of Directors and in no event
less than the greater of: (x) the change in the Consumer Price Index for Urban
Wage Earners and Clerical Workers (1982-1984=100), or (y) four percent (4%) per
year.
4. EXPENSES.
(a) During the term of this Agreement, Employee shall be
entitled to continue to use at no additional expense the company car currently
driven by Employee or a similar replacement vehicle at the expiration of the
current car lease, consistent with the Corporation's practices currently in
effect. Employee shall be reimbursed for all reasonable expenses incurred in
the operation and maintenance of such car consistent with the Corporation
reimbursement procedures and practices currently in effect.
(b) The Corporation will reimburse Employee for all
reasonable and necessary expenses, including without limiting the foregoing,
travel, entertainment, and promotional expenses, incurred by Employee in
carrying out his duties under this Agreement upon the presentation to the
Corporation by Employee from time to time of an itemized account of such
expenses in such form as may be required by the Corporation.
5. FRINGE BENEFITS. During the period of his employment,
Employee shall be afforded the right to participate in any and all group
insurance, medical and health care plans and other employee benefit plans as
are generally made available to other employees of the Corporation and the
right to participate in the profit-sharing plans and stock option plans of
Centrum consistent with executives of other Centrum companies. Copies of all
such Centrum executive profit sharing plans and stock option plans, or an
appropriate detailed description of such plans has been provided to the
Employee as of the date of this Agreement. Employee shall be entitled to three
(3) weeks and one (1) personal day of paid vacation leave during each one (1)
year period of the term of this Agreement, the scheduling of which shall be
subject to the approval of the President of the Corporation.
In addition to the foregoing fringe benefits, Employee shall be
entitled to participate in:
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(a) a medical reimbursement plan for senior executives
which shall supplement the Corporation's medical and health care plans
available to other employees to reimburse Employee for medical and other health
care costs not otherwise covered by such group plans, in an amount not to
exceed Three Thousand Five Hundred Dollars ($3,500.00) per year.
(b) Corporation-sponsored whole life insurance contract
in the amount of One Hundred Thousand Dollars ($100,000.00).
(c) payment for annual dues, membership fees and
assessments for the Aviation Country Club and the Corry Country Club.
(d) executive tax return preparation.
(e) such sick leave, sick pay and disability benefits in
accordance with the Corporation's existing policy for key executive employees.
Pursuant to the Centrum Stock Option Plan (the "Plan"), Centrum will
grant to the Employee a stock option (the "Option"), intending to qualify as a
nonqualified option or (as described in Treas.Reg. Section 1.83-7 or any
successor regulation thereto), to purchase one hundred twenty-five thousand
(125,000) shares of Centrum Common Stock, Five Cents ($.05) par value per share
(the "Common Stock"), at a purchase price of One and 50/100 Dollars ($1.50) per
share, with sixty-two thousand five hundred (62,500) shares to vest after one
(1) year of the term of this Agreement and the balance of the shares to vest
after two (2) years of the term of this Agreement, all as provided in the Plan
and Stock Option Agreement entered into on the date hereof between Centrum and
the Employee; provided, however, in the event that Employee's employment with
the Corporation is terminated other than for cause prior to the first
anniversary of the term of this Agreement, options for sixty-two thousand five
hundred (62,500) shares shall vest in Employee.
6. ILLNESS, OTHER MEDICAL DISABILITY OR DEATH. If Employee
should be prevented from performing his duties by reason of incapacity or
disability for a period of six (6) months or more, service and compensation
(other than that which shall have accrued and remains unpaid) under this
Agreement will cease. When such illness or other medical disability has ended,
Employee shall resume his duties under this Agreement and again become entitled
to receive compensation hereunder. Such illness or other medical disability
shall not extend the terms of this Agreement. If Employee should be prevented
from performing his duties by reason of death, the Corporation shall pay any
salary or disability payment due for the month of Employee's death to
Employee's designated beneficiary or surviving spouse, in the order named, or
if none to the personal representative of Employee's estate, as the case may
be, and this Agreement shall be terminated and of no further force and effect
upon such payment.
7. TERMINATION FOR CAUSE. Corporation may discharge Employee at
any time for:
(a) an act of theft; embezzlement or felony related to
his employment duties with the Corporation;
(b) conviction of a crime of moral turpitude or
dishonesty;
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(c) habitual intoxication or drug addiction;
(d) any material violation of any express direction or
any reasonable rule or regulation established by the Corporation from time to
time regarding the conduct of its business; provided that the Employee shall
have received written notice of such failure and a reasonable opportunity to
discuss the matter with the Board of Directors, followed by a reasonable
opportunity for the Employee to correct his failure and comply with such rule
of the Board of Directors, or any act or omission constituting gross misconduct
which is or is intended to be injurious to the Corporation;
(e) the willful failure of Employee to perform his duties
hereunder; or
(f) any material violation by Employee of the terms and
conditions of this Agreement or any other agreement between the Corporation and
Employee,
in which event the Corporation shall have no further obligations or liabilities
hereunder after the date of such discharge, other than payment of salary,
bonus, or fringe benefits, the rights to which have accrued and remain unpaid.
8. SEVERANCE PAYMENTS. Upon the concurrence of a "Severance
Event" as hereafter defined, the Corporation shall continue to pay to Employee
for the Severance Period the monthly base salary Employee was receiving from
the Corporation immediately prior to the occurrence of such Severance Event;
provided, however, such severance payments to Employee shall be reduced by any
salary or consulting income received by Employee from any source during the
Severance Period. In the event Employee breaches any provision of this
Agreement, all obligations of the Corporation to make severance payments to
Employee pursuant to this Agreement shall cease. For purposes of this
Agreement, a "Severance Event" shall mean: (i) the termination of Employee's
employment with the Corporation by the Corporation other than a termination for
cause as provided for in paragraph 7 hereof; or (ii) the failure of the parties
to renew this Agreement at the expiration of the term specified herein or at
the expiration of any subsequent term agreed to by the parties. The "Severance
Period" shall mean a period of time equal to the remaining term of this
Agreement following a Severance Event; provided, however, in no event shall the
Severance Period be less than one (1) year.
9. NONCOMPETITION, TRADE SECRETS, ETC. As an inducement to the
Corporation to execute this Agreement,
(a) Employee covenants and agrees with the Corporation
that at all times during the term of his employment hereunder, including
extensions thereof, and for a term equal to one (1) year following his
termination of employment with the Corporation or any of its subsidiaries (the
"Restrictive Period"), within the area where the Corporation or any of its
subsidiaries presently do business (including, without limitation, the United
States east of the Mississippi River, the Canadian provinces of Ontario and
Quebec, China and Japan), and where the Corporation does business at the time
of termination of Employee (the "Restrictive Area"), he shall not directly or
indirectly:
4
<PAGE> 5
(i) solicit, induce or encourage any employee of the
Corporation or any of its subsidiaries to terminate his or her relationship
with the Corporation or any of its subsidiaries; or
(ii) employ or establish a business relationship
which is competitive with the Corporation or any of its subsidiaries with any
individual who was employed by the Corporation or any of its subsidiaries
during the preceding twelve (12) month period; or
(iii) encourage or assist any individual or entity
in a business which is competitive with the Corporation or any of its
subsidiaries to employ or establish a business relationship with any individual
who was employed by the Corporation or any of its subsidiaries during the
preceding twelve (12) month period; or
(iv) solicit, induce or encourage any suppliers,
customers or prospective customers to terminate or reduce in scope their
relationship with the Corporation or any of its subsidiaries; or
(v) solicit or assist any individual or entity in the
solicitation of business from, or performance of work for, any customers or
prospective customers of the Corporation; or
(vi) engage in (as a principal, agent, consultant,
partner, director, officer, employee, stockholder, investor or otherwise),
alone or in association with any person or entity, or be financially interested
in, any business which is competitive with the Corporation. Notwithstanding the
foregoing, Employee shall be entitled to hold shares of a publicly-traded
company so long as such shares do not represent more than one percent (1%) of
the outstanding capital of such company.
(b) For purposes of paragraph 9, "customers" shall mean
those customers for whom the Corporation or any of its subsidiaries supplied
products to or performed services during the twelve (12) months preceding the
date in question, and "prospective customers" shall mean persons or entities
whose business was solicited by the Corporation or any of its subsidiaries
during the twelve (12) months preceding the date in question.
(c) Employee shall not use for his personal benefit, or
disclose, communicate or divulge to, or use for the direct or indirect benefit
of any person, firm, association or company,
(i) any information regarding the business methods,
business policies, business strategies, marketing plans, survey procedures,
statistical techniques, research or development projects or results, trade
secrets or other confidential knowledge or processes of, or developed by, the
Corporation or any of its subsidiaries, or
(ii) any confidential data on or relating to past,
present or prospective customers of the Corporation or any of its subsidiaries,
or
5
<PAGE> 6
(iii) budgets, forecasts, pricing information or
unpublished financial information or any other confidential information
relating to or dealing with the business operations or activities of the
Corporation or any of its subsidiaries.
(d) Employee acknowledges and agrees that
(i) the covenants set forth herein are essential
elements of the transactions contemplated by the Acquisition Agreement, that
Employee is receiving adequate consideration hereunder, and that such covenants
are reasonable and necessary in order to protect the legitimate interests of
the Corporation;
(ii) the Corporation will not have any adequate
remedy at law if Employee violates the terms hereof or fails to perform any of
his obligations hereunder; and
(iii) the Corporation shall have the right, in
addition to any other rights either may have under applicable law, to obtain
from any court of competent jurisdiction preliminary and permanent injunctive
relief to restrain any breach or threatened breach of, or otherwise to
specifically enforce any such covenant or any other obligations of Employee
under this Agreement, as well as to obtain damages and an equitable accounting
of all earnings, profits and other benefits arising from such violation, which
rights shall be cumulative and in addition to any other rights or remedies to
which the Corporation may be entitled.
(e) If the Restrictive Period or the Restrictive Area set
forth in paragraph 9(a) should be adjudged unreasonable in any proceeding, then
the Restrictive Period shall be reduced by such number of months or the
Restrictive Area shall be reduced by the elimination of such unreasonable
portion thereof, or both, so that such restrictions may be enforceable for such
time and in the manner adjudged to be reasonable. If Employee violates any of
the restrictions contained in paragraph 9(a), then the restrictive period shall
not run in favor of Employee from the time of the commencement of any such
violation until such time as such violation shall be cured by Employee.
10. INFORMATION REGARDING AGREEMENT. During the term of this
Agreement and during the Restrictive Period, Employee shall not make the terms
and conditions of this Agreement known to any business, entity, or persons
engaged in activities competitive with the Corporation's business with which he
becomes associated subsequent to the termination of his employment with the
Corporation prior to his association with any such business, entity or persons.
The Corporation shall have the right to make the terms of this Agreement known
to third persons.
11. RETURN OF COMPANY PROPERTY. At the time of Employee's
termination of employment with the Corporation or upon demand by the
Corporation, whichever is sooner, Employee shall promptly turn over to the
Corporation all files, documents, business records and any other records,
documents, writings of any kind whatsoever, and all assets of any kind
whatsoever, that belong to the Corporation. Employee shall not copy or record
in any manner whatsoever the information contained in the foregoing materials
and shall turn over any copies or recordings of any kind whatsoever containing
information derived directly or indirectly from the aforestated materials.
6
<PAGE> 7
12. SURVIVAL OF COVENANTS. The covenants in Sections 9, 10 and 11
and acknowledgments of the Employee set forth in this Agreement shall survive
the termination of this Agreement, regardless of the cause therefor.
13. REMEDIES. In the event of any violation of any of the
covenants contained in Sections 9, 10 or 11, the Corporation shall be
authorized to obtain preliminary and permanent injunctive relief as well as an
equitable accounting of any profits or benefits arising out of such violation,
which rights and remedies shall be cumulative and in addition to any other
rights or remedies to which the Corporation may be entitled. In the event of
the violation of any of the restrictions contained in Sections 9, 10 or 11, the
period, if any, therein specified shall abate during the time of violation
thereof and that portion remaining at the time of commencement of any violation
shall not begin to run until such violation has been fully and finally cured.
14. WAIVER. The waiver by the Corporation of the breach of any
provision of this Agreement by Employee shall not operate or be construed as a
waiver of any subsequent breach by it. No waiver by the Corporation shall be
legally operative unless reduced to writing and executed by the President of
the Corporation.
15. NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered if delivered personally or by recognized
overnight courier service or by facsimile to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice, except that notices of changes of address shall be effective upon
receipt):
(i) If to Employee:
Timothy M. Hunter
4138 Mountain Laurel Drive
Erie, Pennsylvania 16510
with a COPY, given in the manner prescribed above, to:
James E. Spoden, Esq.
MacDonald, Illig, Jones & Britton
100 State Street
Suite 700
Erie, Pennsylvania 16507
Fax No.: (814) 454-4647
(ii) If to Corporation:
McInnes Steel Company
441 E. Main Street
Corry, Pennsylvania 16407
Attn: President
Fax No.: (814) 664-9452
7
<PAGE> 8
and
Centrum Industries, Inc.
6135 Trust Drive
Suite 104A
Holland, Ohio 43528
Attention: George H. Wells, President
and Chief Operating Officer
Fax No.: (419) 868-3442
with a COPY, given in the manner prescribed above, to:
John W. Hilbert, II, Esq.
Fuller & Henry, P.L.L.
One SeaGate, Suite 1700
P.O. Box 2088
Toledo, Ohio 43603-2088
Fax No.: (419) 247-2665
16. ENTIRE AGREEMENT; AMENDMENT OR TERMINATION; WAIVER. This
Agreement (and Plan and Option Agreement referred to herein) constitutes the
entire agreement between the parties hereto with respect to the subject matter
hereof. This Agreement may not be amended or terminated except by a written
instrument, signed by each of the parties hereto, expressing such amendment or
termination. No failure on the part of any party to exercise and no delay in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or remedy
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or remedy.
17. GENERAL TERMS. This Agreement is personal in nature and
(a) neither of the parties hereto shall assign or
transfer this Agreement without the written consent of the other, except that
the Corporation may assign or transfer this Agreement
(i) to any successor corporation in the event of
merger, consolidation or transfer or sale of the business of the Corporation in
which Employee is engaged; or
(ii) to a parent or subsidiary corporation which may
be organized to conduct the business of the Corporation, in which Employee is
engaged.
(b) In any of the aforesaid events, Employee shall remain
liable to the Corporation, or its successor and assignees.
18. HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
8
<PAGE> 9
19. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania;
provided, however, that if any provision of this Agreement shall be deemed
invalid or unenforceable under the laws of the Commonwealth of Pennsylvania,
this Agreement shall be governed by, and construed in accordance with, the laws
of the State of Ohio.
20. COUNTERPARTS. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Corporation has caused its appropriate officer
to sign this Agreement, and Employee has signed this Agreement.
MCINNES STEEL COMPANY
By /s/ George H. Wells
------------------------
EMPLOYEE
Witness: /s/ Timothy M. Hunter
---------------------------
TIMOTHY M. HUNTER
/s/ John D. Gillespie
- ---------------------
9
<PAGE> 1
EXHIBIT 10.16
SERVICES AGREEMENT
THIS AGREEMENT is made this 29th day of February, 1996, by and between
MCINNES STEEL COMPANY, a Pennsylvania corporation (hereinafter called
"Corporation"), and STEPHEN J. MAHONEY (hereinafter called "Mahoney").
W I T N E S S E T H:
WHEREAS, Mahoney has extensive managerial experience and abilities and
has been in the continuous full-time employ of the Corporation for thirty (30)
years, most recently serving in the capacity as President.
WHEREAS, Corporation is now a wholly owned subsidiary of Centrum
Industries, Inc., a Delaware corporation ("Centrum"). Corporation wishes to
retain the services of Mahoney and Mahoney wishes to provide services to the
Corporation on the terms and conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the foregoing, and as a condition
to Centrum's obligation to consummate the transactions contemplated in the
Agreement and Plan of Reorganization ("Acquisition Agreement"), the parties,
each intending to be legally bound, agree as follows:
1. SERVICE. Corporation hereby agrees to retain Mahoney and
Mahoney hereby agrees to serve Corporation for the period and upon the terms
and conditions contained in this Agreement.
2. TERM. This Agreement shall be for a term of four (4) years,
commencing as of February 29, 1996 and ending on February 28, 2000, unless
sooner terminated as hereinafter provided.
3. OFFICE AND DUTIES.
(a) Throughout the term of this Agreement, Mahoney agrees to
serve the Corporation as a general consultant and advisor to the management of
the Corporation on matters pertaining to the business of the Corporation.
Subject to the limitations provided in paragraph 3(b) of this Agreement,
Mahoney shall be available to render consultive and advisory services to the
Corporation when requested by the Chairman of the Board of the Corporation (the
"Chairman") or such other officer of the Corporation as may be designated from
time to time by the Chairman, on an as needed basis. Mahoney shall report only
to the Chairman, and, subject to the limitations provided in paragraph 3(b) of
this Agreement, shall devote his best efforts and such time as shall be
necessary to perform his duties and to advance the interests of the
Corporation.
(b) Commencing on the date hereof, Mahoney shall be available
at such times and places as shall be deemed necessary by the Chairman during
the Corporation's regular business hours for a maximum of: forty-five (45) days
in year one and up to thirty (30)
<PAGE> 2
days in each year thereafter during the term of this Agreement. The parties
hereto recognize that the nature of the services to be rendered by Mahoney
during the second, third and fourth years of the term of this Agreement will
not require his presence at the premises where the Corporation's business is
being conducted or elsewhere for any particular or minimum amount of time. His
services may be rendered to the Corporation at such times as are convenient to
him and at and from such places to which he may travel or at which he may be
permanently or temporarily residing. Mahoney's death or disability prior to
the expiration of the term of this Agreement shall not result in any diminution
or forfeiture of the compensation which he is to be paid pursuant to paragraph
4 and, in the event of his death, it shall be paid to his widow or, if none, to
his estate.
(c) Throughout the term of this Agreement and subject to the
limitation in subparagraph 3(b) of this Agreement, Mahoney shall devote such
working time, energy, skill and best efforts to the performance of his duties
hereunder in a manner which will faithfully and diligently further the business
and interests of Corporation.
4. COMPENSATION. For all of the services rendered by Mahoney to
the Corporation, Mahoney shall receive an annual consulting fee of: One Hundred
Thousand Dollars ($100,000) for year one; Seventy Five Thousand Dollars
($75,000) for year two; Seventy Five Thousand Dollars ($75,000) for year three;
and Fifty Thousand Dollars ($50,000) year four, payable in periodic
installments in accordance with the Corporation's regular payroll practices in
effect from time to time.
5. FRINGE BENEFITS. During the term of this Agreement, the
Corporation will reimburse Mahoney for up to Seven Hundred Fifty and 00/100
Dollars ($750.00) per year for tax preparation services. Until such time that
Mahoney reaches age 65, Mahoney shall be entitled to participate in and receive
the benefits of Corporation's group medical and dental plans or programs made
available to other executive officers of Corporation which shall be and remain
comparable to those offered by the Corporation immediately prior to the date
hereof. After Mahoney reaches age 65, the Corporation will provide a Medicare
Supplementing Policy (like 65+) of the kind heretofore provided to retiring
executive officers of the Corporation. For the term of this Agreement and
thereafter to the extent consistent with the past practices of the Corporation,
the Corporation shall reimburse Mahoney under the prescription/medical
reimbursement plan, up to a maximum of Three Thousand Five Hundred Dollars
($3,500.00) per year, and provide to Mahoney while he lives in Corry,
Pennsylvania, landscape and snow removal services generally made available to
other executive officers of the Corporation.
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<PAGE> 3
6. AUTOMOBILE AND EXPENSES.
(a) The Corporation will purchase or lease and make available
to Mahoney a new Lincoln Continental automobile for his exclusive use during
the term of this Agreement with an option in his favor to purchase the
automobile at the price specified in the lease at the expiration of the term of
this Agreement. Mahoney shall be reimbursed for all reasonable expenses
incurred in the operation and maintenance of such car consistent with the
Corporation reimbursement procedures and practices in effect from time to time.
(b) During the term of this Agreement, the Corporation will
reimburse Mahoney for all reasonable expenses incurred by Mahoney at the
request of the Chairman in connection with the performance of Mahoney's duties
hereunder upon receipt of vouchers therefor and in accordance with
Corporation's regular reimbursement procedures and practices in effect from
time to time.
7. Intentionally deleted.
8. CORPORATION PROPERTY. All materials or data of any kind
furnished to Mahoney by Corporation or Centrum, or developed by Mahoney on
behalf of Corporation or Centrum, or at the request of Corporation or Centrum,
or otherwise in connection with Mahoney's services hereunder, are and shall
remain the sole property of Corporation or Centrum, whichever applicable; if
Corporation or Centrum requests the return of such materials at any time
during, at or after the termination of Mahoney's employment, Mahoney shall
immediately deliver the same to Corporation or Centrum, whichever applicable.
9. NONCOMPETITION, TRADE SECRETS, ETC.
(a) Mahoney agrees that, except as set forth herein, for
a period of five (5) years from the date hereof, within the area of the North
American Free Trade Agreement, he shall not directly or indirectly:
(i) solicit, induce or encourage any employee of
Centrum, any of its affiliates of Centrum (the "Centrum Affiliates") or the
Corporation or any of its subsidiaries to terminate his or her relationship
with Centrum, the Centrum Affiliates or the Corporation or any of its
subsidiaries; or
(ii) employ or establish a business relationship
with any individual who was employed by Centrum, the Centrum Affiliates or the
Corporation or any of its subsidiaries during the preceding twelve (12) month
period; or
-3-
<PAGE> 4
(iii) encourage or assist any individual or entity in a
business which is competitive with Centrum, the Centrum Affiliates or the
Corporation or any of its subsidiaries to employ or establish a business
relationship with any individual who was employed by Centrum, the Centrum
Affiliates, the Corporation or any of its subsidiaries during the preceding
twelve (12) month period; or
(iv) solicit, induce or encourage any suppliers, customers
or prospective customers to terminate or reduce in scope their relationship
with Centrum, the Centrum Affiliates or the Corporation or any of its
subsidiaries; or
(v) solicit or assist any individual or entity in the
solicitation of business from, or performance of work for, any customers or
prospective customers of Centrum, the Centrum Affiliates or the Corporation or
any of its subsidiaries; or
(vi) engage in (as a principal, agent, consultant,
partner, director, officer, employee, stockholder, investor or otherwise),
alone or in association with any person or entity, or be financially interested
in, any business which is competitive with Centrum, the Centrum Affiliates or
the Corporation or any of its subsidiaries. Notwithstanding the foregoing,
Mahoney shall be entitled to hold shares of a publicly-traded company so long
as such shares do not represent more than one percent (1%) of the outstanding
capital of such company.
(b) For purposes of paragraph 9, "customers" shall mean
those customers to or for whom Centrum, the Centrum Affiliates or the
Corporation supplied products or performed services during the twelve (12)
months preceding the date in question, and "prospective customers" shall mean
persons or entities whose business was solicited by Centrum, the Centrum
Affiliates or the Corporation or any of its subsidiaries during the twelve (12)
months preceding the date in question.
(c) Mahoney shall not use for his personal benefit, or
disclose, communicate or divulge to, or use for the direct or indirect benefit
of any person, firm, association or company, (i) any confidential information
regarding the business methods, business policies, business strategies,
marketing plans, survey procedures, statistical techniques, research or
development projects or results, trade secrets or other processes of, or
developed by, the Corporation, or (ii) any confidential data on or relating to
past, present or prospective customers of the Corporation, or (iii) budgets,
forecasts, pricing information or unpublished financial information or any
other confidential information relating to or dealing with the business
operations or activities of the Corporation.
-4-
<PAGE> 5
(d) Mahoney acknowledges and agrees that (i) the
covenants set forth in this paragraph 9 are essential elements of the
transactions contemplated by the Acquisition Agreement, that Mahoney is
receiving adequate consideration hereunder, and that such covenants are
reasonable and necessary in order to protect the legitimate interests of
Centrum, the Centrum Affiliates, and the Corporation; (ii) Centrum, the Centrum
Affiliates, and the Corporation will not have any adequate remedy at law if
Mahoney violates the terms hereof or fails to perform any of his obligations
hereunder; and (iii) Centrum, the Centrum Affiliates, and the Corporation shall
have the right, in addition to any other rights any of them may have under
applicable law, to obtain from any court of competent jurisdiction preliminary
and permanent injunctive relief to restrain any breach or threatened breach of,
or otherwise to specifically enforce any such covenant or any other obligations
of Mahoney under, this Agreement, as well as to obtain damages and an equitable
accounting of all earnings, profits and other benefits arising from such
violation, which rights shall be cumulative and in addition to any other rights
or remedies to which Centrum or the Corporation may be entitled.
(e) If the period of time or territorial scope of any
restriction set forth in paragraph 9(a) should be adjudged unreasonable in any
proceeding, then the period of time shall be reduced by such number of months
or the territory shall be reduced by the elimination of such unreasonable
portion thereof, or both, so that such restrictions may be enforceable for such
time and in the manner adjudged to be reasonable. If Mahoney violates any of
the restrictions contained in paragraph 9(a), then the restrictive period shall
not run in favor of Mahoney from the time of the commencement of any such
violation until such time as such violation shall be cured by Mahoney.
10. INDEPENDENT CONTRACTOR. Mahoney shall conduct any and all services
pursuant to this Agreement as an independent contractor. No relationship of
employer and employee, joint venture or partnership will be created by this
Agreement. Mahoney will act hereunder as an independent contractor, and except
as expressly provided herein, with no claim under this Agreement or otherwise
against the Corporation for vacation pay, sick leave, retirement benefits,
social security, workers compensation, disability or unemployment insurance
benefits. Except as otherwise specifically set forth in paragraph 6 of this
Agreement, Mahoney shall be solely responsible for, and shall not have any
claim against, the Corporation, for any business expenses incurred by Mahoney
as a result of or in performance of his obligation under this Agreement. As an
independent contractor, Mahoney will be responsible for the payment of any
applicable federal, state and local taxes that may arise as a result of monies
he shall receive from the Corporation. Mahoney shall promptly pay all said
applicable taxes and, upon request, furnish the Corporation with evidence of
said payment.
-5-
<PAGE> 6
Mahoney agrees to indemnify the Corporation for any monies paid by reason of
Mahoney's failure to pay any applicable federal, state or local taxes on any
amounts paid to Mahoney under the terms of this Agreement.
11. MISCELLANEOUS.
(a) INDULGENCES, ETC. Neither the failure nor any
delay on the part of Centrum, any Centrum Affiliate, or the Corporation to
exercise any right, remedy, power or privilege under this Agreement (a "Right")
shall operate as a waiver thereof, nor shall any single or partial exercise of
any Right preclude any other or further exercise of the same or of any other
Right, nor shall any waiver of any Right with respect to any occurrence be
construed as a waiver of such Right with respect to any other occurrence. No
waiver shall be effective against Centrum or the Corporation unless it is in
writing and is signed by Centrum or the Corporation, as the case may be.
(b) NOTICES. All notices and other communications given
or made pursuant hereto shall be in writing and shall be deemed to have been
duly given or made as of the date delivered if delivered personally or by
recognized overnight courier service or by facsimile to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice, except that notices of changes of address shall be effective
upon receipt):
(i) If to Mahoney:
Stephen J. Mahoney
19019 Hillcrest Drive
Corry, Pennsylvania 16407-0901
with a COPY, given in the manner prescribed above, to:
Edward Walsh, Esq.
Vetter, Price
805 Third Avenue
22nd Floor
New York, NY 10022
Fax No.: (212) 407-7799
(ii) If to Corporation or Centrum, or an Centrum
Affiliate:
Centrum Industries, Inc.
6135 Trust Drive
Suite 104A
Holland, Ohio 43528
Attention: George Wells, President
Fax No.: (419) 868-3442
-6-
<PAGE> 7
with a COPY, given in the manner prescribed above, to:
John W. Hilbert II, Esq.
Fuller & Henry P.L.L.
One SeaGate, Suite 1700
P.O. Box 2088
Toledo, Ohio 43603-2088
Fax No.: (419) 247-2665
(c) HEADINGS. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(d) GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of Pennsylvania;
provided, however, that if any provision of this Agreement shall be deemed
invalid or unenforceable under the laws of the State of Pennsylvania, this
Agreement shall be governed by and construed in accordance with the laws of the
State of Ohio.
(e) BINDING NATURE OF AGREEMENT. This Agreement shall be
binding upon and inure to the benefit of Centrum, the Centrum Affiliates, and
the Corporation and their respective successors and assigns and shall be
binding upon Mahoney, his heirs and legal representatives.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first above written.
MCINNES STEEL COMPANY
By /s/ George H. Wells
------------------------
MAHONEY
/s/ Stephen J. Mahoney
----------------------------
STEPHEN J. MAHONEY
-7-
<PAGE> 1
EXHIBIT 10.17
CENTRUM INDUSTRIES, INC.
STOCK OPTION AGREEMENT
THIS AGREEMENT is made as of this 29th day of February, 1996, by and
between Centrum Industries, Inc., a Delaware corporation ("Centrum") and
Anthony A. Montani ("Employee").
WHEREAS, pursuant to the Agreement and Plan of Reorganization between
Centrum, Centrum Merging Corporation, and McInnes Steel Company ("McInnes")
dated December 5, 1995, as amended February 5, 1996, McInnes has agreed to
enter into an employment agreement with the Employee and Centrum has further
agreed, in connection with such employment agreement, to grant the Employee an
option to purchase shares of Centrum's common stock, effective upon the
Effective Date of Merger, as defined therein, according to the terms and
conditions of this Stock Option Agreement; and
WHEREAS, the Centrum Board of Directors has approved the grant of the
stock option pursuant to this Agreement to Employee as an inducement to
Employee to remain in the employ of Centrum or a Centrum affiliate.
NOW THEREFORE, in consideration of the mutual covenants contained in
this Agreement, the parties hereto agree as follows:
SECTION 1 - GRANT OF OPTION. Subject to the vesting schedule set
forth in Section 2, Centrum hereby grants to Employee the right and option to
purchase from it, on the following terms and conditions, all or any part of an
aggregate of One Hundred Fifty Thousand (150,000) shares of Centrum's common
stock $.05 value (the "Shares"). The purchase price for all Shares shall be
One and 50/00 Dollar ($1.50) per share, exercisable and payable as hereinafter
provided.
SECTION 2 - VESTING SCHEDULE. The Employee's right to the option
granted in Section 1 shall be conditional and subject to the Employee's
continued employment with McInnes, Centrum, or a Centrum affiliate. Except as
provided in Section 5, the option shall be deemed to be unconditional and fully
vested, as follows:
A. If the Employee leaves the employ of McInnes,
Centrum, or a Centrum affiliate prior to December 31,
1996, then no shares will deemed to be vested, and
the Employee shall not be entitled to purchase any
Shares pursuant to this option.
B. If the employee remains an employee of McInnes,
Centrum or a Centrum affiliate through December 31,
1996, then as of January 1, 1997 the Employee shall
have the unconditional and unrestricted right to
exercise the option with respect to fifty percent
(50)% of the Shares.
<PAGE> 2
C. If the employee remains an employee of McInnes,
Centrum, or a Centrum affiliate through December 31,
1997, then as of January 1, 1998 the Employee shall
have the unconditional and unrestricted right to one
hundred percent (100%) of the Shares.
The portion of the Shares for which the Employee may exercise the option
unconditionally and without restriction as provided in this Section 2 shall
hereinafter be referred to as the "Vested Shares."
SECTION 3 - EXERCISE OF OPTION; CHANGE OF CONTROL. The Employee may
elect to exercise the option with respect to Vested Shares at any time on or
after January 1, 1997. Notwithstanding the above, if Centrum's officers or
directors execute a letter of intent (binding or non- binding) by which Centrum
will become a party to a transaction which will effect a "Change of Control" of
Centrum, Employee must exercise his options with respect to the Vested Shares
within the thirty (30) day period following the date of notice to Employee that
a letter of intent has been entered into, or else the option and all rights
granted by this Agreement, to the extent those rights have not been exercised,
will terminate and become null and void. No partial exercise of such option
may be for less than one (1) full Share. For purposes of this Agreement
"Change of Control" shall be effected if (i) Centrum merges with or into or
consolidates with another corporation following the requisite approval of the
shareholders of Centrum of such merger or consolidation and, after giving
effect to such merger or consolidation, less than fifty-one (51%) of the then
outstanding voting securities of the surviving or resulting corporation
represent or were issued in exchange for voting securities of Centrum
outstanding immediately prior to such merger or consolidation; (ii) there is a
sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all or substantially all the assets of Centrum
following the requisite approval of the shareholders of Centrum of such
transaction or series of transactions; or (iii) the requisite approval of the
shareholders of Centrum is obtained to approve any plan or proposal for the
liquidation or dissolution of Centrum. The option shall be exercisable with
respect to Vested Shares only by Employee during his lifetime and only if
Employee was an employee of McInnes, Centrum or a Centrum affiliate on the date
three (3) months prior to the date of exercise. If Employee is disabled within
the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as
amended (the "Code"), the reference to the three (3) month period above shall
be read as one (1) year.
SECTION 4 - METHOD OF EXERCISE. The option granted under this
Agreement shall be exercisable as provided above, upon written notice to
Centrum and the payment in cash to Centrum of the full purchase price of the
Vested Shares which the Employee elects to purchase.
SECTION 5 - TERMINATION OF EMPLOYMENT. In the event that an Employee
shall cease to be employed by McInnes, Centrum, or a Centrum affiliate, whether
voluntarily or involuntarily, for any reason other than death or disability,
all of Employee's rights to further exercise his option(s) as to Vested Shares
shall expire six (6) months after the date of termination of employment;
provided, however, that if
2
<PAGE> 3
the Employee is terminated "without cause," as defined in his employment
agreement with McInnes prior to the first anniversary of the date of such
employment agreement, then, notwithstanding Section 2 of this Agreement, the
number of Shares which shall be deemed to be Vested Shares under this Agreement
shall be one-half (1/2) of the total number of shares granted pursuant to
Section 1; and, provided, further, that no option shall be exercisable after
the expiration date set forth in Section 7. A leave of absence with the
express written consent of Centrum shall not be considered termination of
employment for purposes of this Section 5.
SECTION 6 - DEATH OR DISABILITY OF EMPLOYEE. In the event of the
death or disability of an Employee while employed by McInnes, Centrum, or a
Centrum affiliate, his right to purchase Vested Shares may be exercised (to the
extent that Employee was entitled to do so at the date of his death or
disability) by him or, in the case of the death of Employee, by his personal
representative or by any person or persons who shall have acquired the option
directly from Employee by will or by the laws of descent and distribution, at
any time within three (3) months after the date of his death or disability;
provided that if an Employee is disabled as defined in Section 3 of this
Agreement, the three (3) month period referred to above shall be read as one
(1) year. Notwithstanding anything herein to the contrary, no option shall be
exercisable after the expiration of the term of the option set forth in Section
7.
SECTION 7 - TERMINATION OF OPTION. The option and all rights granted
by this Agreement, to the extent those rights have not been exercised will
terminate and become null and void at 5:00 p.m. on February 28, 2006.
SECTION 8 - SHARES AS INVESTMENT. By accepting this option, the
Employee acknowledges that any and all Shares purchased pursuant to the
exercise of the option under this Agreement shall be acquired for investment
and not for distribution, and upon the delivery of any and all of the Shares
due to the exercise of the option granted hereunder, the Employee shall deliver
to Centrum a representation in writing and in a form acceptable to Centrum that
such Shares are being acquired in good faith for investment and not for
distribution. This Section 8 shall not apply in the event that the Shares have
been registered pursuant to the Securities Act of 1933 and applicable state
securities laws.
SECTION 9 - RESTRICTIONS ON SHARES. The Shares issued pursuant to the
exercise of the option granted in Section 1 shall not be registered under
federal securities laws or the securities of any state and will, therefore, be
deemed restricted and certain restrictions will be applicable upon the resale
of such security. Each Share will, upon issuance, contain a restrictive legend
in substantially the following form:
The common stock represented by this certificate has not been
registered under the Securities Act of 1933, as amended or
under the securities laws of any state. Each holder desiring
to transfer the common stock must furnish Centrum with a
written opinion reasonably satisfactory to Centrum in the form
and substance from counsel reasonably satisfactory to Centrum
by reason of
3
<PAGE> 4
experience to the effect that the holder may transfer the
common stock as desired without registration under the
Securities Act or the securities laws of any state.
This Section 9 shall not apply in the event that the Shares have been
registered pursuant to the Securities Act of 1933 and applicable state
securities laws.
SECTION 10 - DILUTION OR OTHER AGREEMENT. In the event that
additional Shares are issued pursuant to a stock split or a stock dividend, the
number of Shares then covered by each outstanding option granted hereunder
shall be increased proportionately with no increase in the total purchase price
of the Shares then so covered. If the issued and outstanding Shares are
reduced by a reverse stock split or other combination of Shares, (other than by
a transaction described in Section 3 of this Agreement), the number of Shares
then covered by each outstanding option granted hereunder shall be reduced
proportionately with no reduction in the total price of the Shares then so
covered. In the event that Centrum should transfer assets to another
corporation and distribute the stock of such other corporation without the
surrender of Shares, and if such distribution is not taxable as a dividend and
no gain or loss is recognized by reason of Section 355 of the Code, or some
similar section, then the total purchase price of the Shares shall be reduced
by an amount which bears the same ratio to the total purchase price then in
effect as the market value of the stock distributed with respect to the Shares
immediately following the distribution, bears to the aggregate of the market
value of such time of a Share and the stock distributed in respect thereof. No
fractional shares shall be issued, and any fractional Shares resulting from the
computations pursuant to this Section 10, shall be eliminated from the option.
No adjustment shall be made for cash dividends or the issuance to stockholders
of rights to subscribe for additional Shares or other securities.
SECTION 11 - RIGHT OF SHAREHOLDER. The Employee shall not have any
rights or privileges of a shareholder of Centrum in respect with the Shares
transferable upon exercise of the option granted under this Agreement, unless
and until certificates representing such Shares shall have been endorsed,
transferred, and delivered and the transferee has caused his name to be entered
as the shareholder of record on the books of Centrum.
SECTION 12 - NON-TRANSFERABILITY. The option shall not be
transferable and the option may be exercised, during the lifetime of the
Employee only by him. Except as specifically provided in this Agreement, the
option may not be assigned, transferred, pledged or hypothecated in any way,
shall not be assignable by operation of law, including but not limited to a
decree in a domestic relations proceeding, and shall not be subject to
execution, attachment or similar process. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of the option, and the levy of any
execution, attachment, or similar process upon the option in violation of this
Agreement, shall be null and void and without effect.
4
<PAGE> 5
SECTION 13 - AFFILIATE. As used herein, the term "affiliate" shall
mean any present or any future corporation which would be deemed an affiliate
of Centrum in Rule 12b-2 of the regulations promulgated pursuant to the
Securities Exchange Act of 1934.
SECTION 14 - NOTICES. Any notice to be given under the terms of this
Agreement shall be addressed to Centrum in care of its President at 6135 Trust
Drive, Suite 104A, Holland, Ohio 43528 with a copy to John W. Hilbert II, Esq.,
Fuller & Henry P.L.L., One SeaGate, 17th Floor, P. O. Box 2088, Toledo, Ohio
43603 and any notice to be given to Employee shall be addressed to him at 691
Wayne Street, Corry, Pennsylvania 16407, or at such other address as either
party may hereafter designate in writing to the other. Any such notice shall
be deemed duly given when mailed by prepaid regular, registered, or certified
mail.
SECTION 15 - BINDING EFFECT. This Agreement shall be binding upon
Employee and his executors administrators, and representatives and assigns, and
upon Centrum and its successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first set forth above.
CENTRUM INDUSTRIES, INC.
By: /s/ George H. Wells
------------------------------
George H. Wells, President and
Chief Executive Officer
"EMPLOYEE"
/s/ Anthony A. Montani
-----------------------------------
Anthony A. Montani
5
<PAGE> 1
EXHIBIT 10.18
CENTRUM INDUSTRIES, INC.
STOCK OPTION AGREEMENT
THIS AGREEMENT is made as of this 29th day of February, 1996, by and
between Centrum Industries, Inc., a Delaware corporation ("Centrum") and
Anthony A. Montani ("Employee").
WHEREAS, pursuant to the Agreement and Plan of Reorganization between
Centrum, Centrum Merging Corporation, and McInnes Steel Company ("McInnes")
dated December 5, 1995, as amended February 5, 1996, Centrum has agreed, upon
the Employee's election to defer cash payment for the Employee's options for
McInnes common stock, to grant an option to purchase shares of Centrum's common
stock, effective upon the Effective Date of Merger, as defined therein,
according to the terms and conditions of this Stock Option Agreement; and
NOW THEREFORE, in consideration of the mutual covenants contained in
this Agreement, the parties hereto agree as follows:
SECTION 1 - GRANT OF OPTION. Centrum hereby grants to Employee the
right and option to purchase from it, on the following terms and conditions,
all or any part of an aggregate of Sixty-Six Thousand Two Hundred (66,200)
shares of Centrum's common stock $.05 value (the "Shares"). The purchase price
for all Shares shall be 64/00 Dollar ($.64) per share, exercisable and payable
as hereinafter provided.
SECTION 2 - EXERCISE OF OPTION; CHANGE OF CONTROL. Except as
otherwise expressly set forth herein, the Employee may elect to exercise the
option at any time after the Effective Date of Merger. Notwithstanding the
above, if Centrum's officers or directors execute a letter of intent (binding
or non-binding) by which Centrum will become a party to a transaction which
will effect a "Change of Control" of Centrum, Employee must exercise his
options within the thirty (30) day period following the date of notice to
Employee that a letter of intent has been entered into, or else the option and
all rights granted by this Agreement, to the extent those rights have not been
exercised, will terminate and become null and void. No partial exercise of
such option may be for less than one (1) full Share. For purposes of this
Agreement "Change of Control" shall be effected if (i) Centrum merges with or
into or consolidates with another corporation following the requisite approval
of the shareholders of Centrum of such merger or consolidation and, after
giving effect to such merger or consolidation, less than fifty-one (51%) of the
then outstanding voting securities of the surviving or resulting corporation
represent or were issued in exchange for voting securities of Centrum
outstanding immediately prior to such merger or consolidation; (ii) there is a
sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all or substantially all the assets of Centrum
following the requisite approval of the shareholders of Centrum of such
transaction or series of transactions; or (iii) the requisite approval of the
shareholders
<PAGE> 2
of Centrum is obtained to approve any plan or proposal for the liquidation or
dissolution of Centrum. The option shall be exercisable only by Employee
during his lifetime and only if Employee was an employee of McInnes, Centrum or
a Centrum affiliate on the date three (3) months prior to the date of exercise.
If Employee is disabled within the meaning of Section 22(e)(3) of the Internal
Revenue Code of 1986, as amended (the "Code"), the reference to the three (3)
month period above shall be read as one (1) year.
SECTION 3 - METHOD OF EXERCISE. The option granted under this
Agreement shall be exercisable as provided above, upon written notice to
Centrum and the payment in cash to Centrum of the full purchase price of the
Shares which the Employee elects to purchase.
SECTION 4 - TERMINATION OF EMPLOYMENT. In the event that an Employee
shall cease to be employed by McInnes, Centrum, or a Centrum affiliate, whether
voluntarily or involuntarily, for any reason other than death or disability,
all of Employee's rights to further exercise his option(s) shall expire ten
(10) days after the date of termination of employment; provided, however, that
no option shall be exercisable after the expiration date set forth in Section
6. A leave of absence with the express written consent of Centrum shall not be
considered termination of employment for purposes of this Section 4.
SECTION 5 - DEATH OR DISABILITY OF EMPLOYEE. In the event of the
death or disability of an Employee while employed by McInnes, Centrum, or a
Centrum affiliate, his right to purchase Shares may be exercised (to the extent
that Employee was entitled to do so at the date of his death or disability) by
him or, in the case of the death of Employee, by his personal representative or
by any person or persons who shall have acquired the option directly from
Employee by will or by the laws of descent and distribution, at any time within
three (3) months after the date of his death or disability; provided that if an
Employee is disabled as defined in Section 2 of this Agreement, the three (3)
month period referred to above shall be read as one (1) year. Notwithstanding
anything herein to the contrary, no option shall be exercisable after the
expiration of the term of the option set forth in Section 6.
SECTION 6 - TERMINATION OF OPTION. The option and all rights granted
by this Agreement, to the extent those rights have not been exercised will
terminate and become null and void at 5:00 p.m. on February 28, 2006.
SECTION 7 - SHARES AS INVESTMENT. By accepting this option, the
Employee acknowledges that any and all Shares purchased pursuant to the
exercise of the option under this Agreement shall be acquired for investment
and not for distribution, and upon the delivery of any and all of the Shares
due to the exercise of the option granted hereunder, the Employee shall deliver
to Centrum a representation in writing and in a form acceptable to Centrum that
such Shares are being acquired in good faith for investment and not for
distribution. This Section 7 shall not apply in the event that the Shares have
been registered pursuant to the Securities Act of 1933 and applicable state
securities laws.
2
<PAGE> 3
SECTION 8 - RESTRICTIONS ON SHARES. The Shares issued pursuant to the
exercise of the option granted in Section 1 shall not be registered under
federal securities laws or the securities of any state and will, therefore, be
deemed restricted and certain restrictions will be applicable upon the resale
of such security. Each Share will, upon issuance, contain a restrictive legend
in substantially the following form:
The common stock represented by this certificate has not been
registered under the Securities Act of 1933, as amended or
under the securities laws of any state. Each holder desiring
to transfer the common stock must furnish Centrum with a
written opinion reasonably satisfactory to Centrum in the form
and substance from counsel reasonably satisfactory to Centrum
by reason of experience to the effect that the holder may
transfer the common stock as desired without registration
under the Securities Act or the securities laws of any state.
This Section 8 shall not apply in the event that the Shares have been
registered pursuant to the Securities Act of 1933 and applicable state
securities laws.
SECTION 9 - DILUTION OR OTHER AGREEMENT. In the event that
additional Shares are issued pursuant to a stock split or a stock dividend, the
number of Shares then covered by each outstanding option granted hereunder
shall be increased proportionately with no increase in the total purchase price
of the Shares then so covered. If the issued and outstanding Shares are
reduced by a reverse stock split or other combination of Shares, (other than by
a transaction described in Section 3 of this Agreement), the number of Shares
then covered by each outstanding option granted hereunder shall be reduced
proportionately with no reduction in the total price of the Shares then so
covered. In the event that Centrum should transfer assets to another
corporation and distribute the stock of such other corporation without the
surrender of Shares, and if such distribution is not taxable as a dividend and
no gain or loss is recognized by reason of Section 355 of the Code, or some
similar section, then the total purchase price of the Shares shall be reduced
by an amount which bears the same ratio to the total purchase price then in
effect as the market value of the stock distributed with respect to the Shares
immediately following the distribution, bears to the aggregate of the market
value of such time of a Share and the stock distributed in respect thereof. No
fractional shares shall be issued, and any fractional Shares resulting from the
computations pursuant to this Section 10, shall be eliminated from the option.
No adjustment shall be made for cash dividends or the issuance to stockholders
of rights to subscribe for additional Shares or other securities.
SECTION 10 - RIGHT OF SHAREHOLDER. The Employee shall not have any
rights or privileges of a shareholder of Centrum in respect with the Shares
transferable upon exercise of the option granted under this Agreement, unless
and until certificates representing such Shares shall have been endorsed,
transferred, and delivered and the transferee has caused his name to be entered
as the shareholder of record on the books of Centrum.
3
<PAGE> 4
SECTION 11 - NON-TRANSFERABILITY. The option shall not be
transferable and the option may be exercised, during the lifetime of the
Employee only by him. Except as specifically provided in this Agreement, the
option may not be assigned, transferred, pledged or hypothecated in any way,
shall not be assignable by operation of law, including but not limited to a
decree in a domestic relations proceeding, and shall not be subject to
execution, attachment or similar process. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of the option, and the levy of any
execution, attachment, or similar process upon the option in violation of this
Agreement, shall be null and void and without effect.
SECTION 12 - AFFILIATE. As used herein, the term "affiliate" shall
mean any present or any future corporation which would be deemed an affiliate
of Centrum in Rule 12b-2 of the regulations promulgated pursuant to the
Securities Exchange Act of 1934.
SECTION 13 - NOTICES. Any notice to be given under the terms of this
Agreement shall be addressed to Centrum in care of its President at 6135 Trust
Drive, Suite 104A, Holland, Ohio 43528 with a copy to John W. Hilbert, Esq.,
Fuller & Henry P.L.L., One SeaGate, 17th Floor, P.O. Box 2088, Toledo, Ohio
43603 and any notice to be given to Employee shall be addressed to him at 691
Wayne St., Corry, Pennsylvania 16407, or at such other address as either party
may hereafter designate in writing to the other. Any such notice shall be
deemed duly given when mailed by prepaid regular, registered, or certified
mail.
SECTION 14 - BINDING EFFECT. This Agreement shall be binding upon
Employee and his executors administrators, and representatives and assigns, and
upon Centrum and its successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first set forth above.
CENTRUM INDUSTRIES, INC.
By: /s/ George H. Wells
------------------------------
George H. Wells, President and
Chief Executive Officer
"EMPLOYEE"
/s/ Anthony A. Montani
--------------------------------
Anthony A. Montani
4
<PAGE> 1
EXHIBIT 10.19
CENTRUM INDUSTRIES, INC.
STOCK OPTION AGREEMENT
THIS AGREEMENT is made as of this 29th day of February 1996, by and
between Centrum Industries, Inc., a Delaware corporation ("Centrum") and
Timothy M. Hunter ("Employee").
WHEREAS, pursuant to the Agreement and Plan of Reorganization between
Centrum, Centrum Merging Corporation, and McInnes Steel Company ("McInnes")
dated December 5, 1995, as amended February 5, 1996, McInnes has agreed to
enter into an employment agreement with the Employee and Centrum has further
agreed, in connection with such employment agreement, to grant the Employee an
option to purchase shares of Centrum's common stock, effective upon the
Effective Date of Merger, as defined therein, according to the terms and
conditions of this Stock Option Agreement; and
WHEREAS, the Centrum Board of Directors has approved the grant of the
stock option pursuant to this Agreement to Employee as an inducement to
Employee to remain in the employ of Centrum or a Centrum affiliate.
NOW THEREFORE, in consideration of the mutual covenants contained in
this Agreement, the parties hereto agree as follows:
SECTION 1 - GRANT OF OPTION. Subject to the vesting schedule set
forth in Section 2, Centrum hereby grants to Employee the right and option to
purchase from it, on the following terms and conditions, all or any part of an
aggregate of One Hundred Twenty-Five Thousand (125,000) shares of Centrum's
common stock $.05 value (the "Shares"). The purchase price for all Shares
shall be One and 50/00 Dollar ($1.50) per share, exercisable and payable as
hereinafter provided.
SECTION 2 - VESTING SCHEDULE. The Employee's right to the option
granted in Section 1 shall be conditional and subject to the Employee's
continued employment with McInnes, Centrum, or a Centrum affiliate. Except as
provided in Section 5, the option shall be deemed to be unconditional and fully
vested, as follows:
A. If the Employee leaves the employ of McInnes,
Centrum, or a Centrum affiliate prior to December 31,
1996, then no shares will deemed to be vested, and
the Employee shall not be entitled to purchase any
Shares pursuant to this option.
B. If the employee remains an employee of McInnes,
Centrum or a Centrum affiliate through December 31,
1996, then as of January 1, 1997 the Employee shall
have the unconditional and unrestricted right to
exercise the option with respect to fifty percent
(50)% of the Shares.
<PAGE> 2
C. If the employee remains an employee of McInnes,
Centrum, or a Centrum affiliate through December 31,
1997, then as of January 1, 1998 the Employee shall
have the unconditional and unrestricted right to one
hundred percent (100%) of the Shares.
The portion of the Shares for which the Employee may exercise the option
unconditionally and without restriction as provided in this Section 2 shall
hereinafter be referred to as the "Vested Shares."
SECTION 3 - EXERCISE OF OPTION; CHANGE OF CONTROL. The Employee may
elect to exercise the option with respect to Vested Shares at any time on or
after January 1, 1997. Notwithstanding the above, if Centrum's officers or
directors execute a letter of intent (binding or non- binding) by which Centrum
will become a party to a transaction which will effect a "Change of Control" of
Centrum, Employee must exercise his options with respect to the Vested Shares
within the thirty (30) day period following the date of notice to Employee that
a letter of intent has been entered into, or else the option and all rights
granted by this Agreement, to the extent those rights have not been exercised,
will terminate and become null and void. No partial exercise of such option
may be for less than one (1) full Share. For purposes of this Agreement
"Change of Control" shall be effected if (i) Centrum merges with or into or
consolidates with another corporation following the requisite approval of the
shareholders of Centrum of such merger or consolidation and, after giving
effect to such merger or consolidation, less than fifty-one (51%) of the then
outstanding voting securities of the surviving or resulting corporation
represent or were issued in exchange for voting securities of Centrum
outstanding immediately prior to such merger or consolidation; (ii) there is a
sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all or substantially all the assets of Centrum
following the requisite approval of the shareholders of Centrum of such
transaction or series of transactions; or (iii) the requisite approval of the
shareholders of Centrum is obtained to approve any plan or proposal for the
liquidation or dissolution of Centrum. The option shall be exercisable with
respect to Vested Shares only by Employee during his lifetime and only if
Employee was an employee of McInnes, Centrum or a Centrum affiliate on the date
three (3) months prior to the date of exercise. If Employee is disabled within
the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as
amended (the "Code"), the reference to the three (3) month period above shall
be read as one (1) year.
SECTION 4 - METHOD OF EXERCISE. The option granted under this
Agreement shall be exercisable as provided above, upon written notice to
Centrum and the payment in cash to Centrum of the full purchase price of the
Vested Shares which the Employee elects to purchase.
SECTION 5 - TERMINATION OF EMPLOYMENT. In the event that an Employee
shall cease to be employed by McInnes, Centrum, or a Centrum affiliate, whether
voluntarily or involuntarily, for any reason other than death or disability,
all of Employee's rights to further exercise his option(s) as to Vested Shares
shall expire six (6) months after the date of termination of employment;
provided, however, that if
2
<PAGE> 3
the Employee is terminated "without cause," as defined in his employment
agreement with McInnes prior to the first anniversary of the date of such
employment agreement, then, notwithstanding Section 2 of this Agreement, the
number of Shares which shall be deemed to be Vested Shares under this Agreement
shall be one-half (1/2) of the total number of shares granted pursuant to
Section 1; and, provided, further, that no option shall be exercisable after
the expiration date set forth in Section 7. A leave of absence with the
express written consent of Centrum shall not be considered termination of
employment for purposes of this Section 5.
SECTION 6 - DEATH OR DISABILITY OF EMPLOYEE. In the event of the
death or disability of an Employee while employed by McInnes, Centrum, or a
Centrum affiliate, his right to purchase Vested Shares may be exercised (to the
extent that Employee was entitled to do so at the date of his death or
disability) by him or, in the case of the death of Employee, by his personal
representative or by any person or persons who shall have acquired the option
directly from Employee by will or by the laws of descent and distribution, at
any time within three (3) months after the date of his death or disability;
provided that if an Employee is disabled as defined in Section 3 of this
Agreement, the three (3) month period referred to above shall be read as one
(1) year. Notwithstanding anything herein to the contrary, no option shall be
exercisable after the expiration of the term of the option set forth in
Section 7.
SECTION 7 - TERMINATION OF OPTION. The option and all rights granted
by this Agreement, to the extent those rights have not been exercised will
terminate and become null and void at 5:00 p.m. on February 28, 2006.
SECTION 8 - SHARES AS INVESTMENT. By accepting this option, the
Employee acknowledges that any and all Shares purchased pursuant to the
exercise of the option under this Agreement shall be acquired for investment
and not for distribution, and upon the delivery of any and all of the Shares
due to the exercise of the option granted hereunder, the Employee shall deliver
to Centrum a representation in writing and in a form acceptable to Centrum that
such Shares are being acquired in good faith for investment and not for
distribution. This Section 8 shall not apply in the event that the Shares have
been registered pursuant to the Securities Act of 1933 and applicable state
securities laws.
SECTION 9 - RESTRICTIONS ON SHARES. The Shares issued pursuant to the
exercise of the option granted in Section 1 shall not be registered under
federal securities laws or the securities of any state and will, therefore, be
deemed restricted and certain restrictions will be applicable upon the resale
of such security. Each Share will, upon issuance, contain a restrictive legend
in substantially the following form:
The common stock represented by this certificate has not been
registered under the Securities Act of 1933, as amended or
under the securities laws of any state. Each holder desiring
to transfer the common stock must furnish Centrum with a
written opinion reasonably satisfactory to Centrum in the form
and substance from counsel reasonably satisfactory to Centrum
by reason of
3
<PAGE> 4
experience to the effect that the holder may transfer the
common stock as desired without registration under the
Securities Act or the securities laws of any state.
This Section 9 shall not apply in the event that the Shares have been
registered pursuant to the Securities Act of 1933 and applicable state
securities laws.
SECTION 10 - DILUTION OR OTHER AGREEMENT. In the event that
additional Shares are issued pursuant to a stock split or a stock dividend, the
number of Shares then covered by each outstanding option granted hereunder
shall be increased proportionately with no increase in the total purchase price
of the Shares then so covered. If the issued and outstanding Shares are
reduced by a reverse stock split or other combination of Shares, (other than by
a transaction described in Section 3 of this Agreement), the number of Shares
then covered by each outstanding option granted hereunder shall be reduced
proportionately with no reduction in the total price of the Shares then so
covered. In the event that Centrum should transfer assets to another
corporation and distribute the stock of such other corporation without the
surrender of Shares, and if such distribution is not taxable as a dividend and
no gain or loss is recognized by reason of Section 355 of the Code, or some
similar section, then the total purchase price of the Shares shall be reduced
by an amount which bears the same ratio to the total purchase price then in
effect as the market value of the stock distributed with respect to the Shares
immediately following the distribution, bears to the aggregate of the market
value of such time of a Share and the stock distributed in respect thereof. No
fractional shares shall be issued, and any fractional Shares resulting from the
computations pursuant to this Section 10, shall be eliminated from the option.
No adjustment shall be made for cash dividends or the issuance to stockholders
of rights to subscribe for additional Shares or other securities.
SECTION 11 - RIGHT OF SHAREHOLDER. The Employee shall not have any
rights or privileges of a shareholder of Centrum in respect with the Shares
transferable upon exercise of the option granted under this Agreement, unless
and until certificates representing such Shares shall have been endorsed,
transferred, and delivered and the transferee has caused his name to be entered
as the shareholder of record on the books of Centrum.
SECTION 12 - NON-TRANSFERABILITY. The option shall not be
transferable and the option may be exercised, during the lifetime of the
Employee only by him. Except as specifically provided in this Agreement, the
option may not be assigned, transferred, pledged or hypothecated in any way,
shall not be assignable by operation of law, including but not limited to a
decree in a domestic relations proceeding, and shall not be subject to
execution, attachment or similar process. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of the option, and the levy of any
execution, attachment, or similar process upon the option in violation of this
Agreement, shall be null and void and without effect.
4
<PAGE> 5
SECTION 13 - AFFILIATE. As used herein, the term "affiliate" shall
mean any present or any future corporation which would be deemed an affiliate
of Centrum in Rule 12b-2 of the regulations promulgated pursuant to the
Securities Exchange Act of 1934.
SECTION 14 - NOTICES. Any notice to be given under the terms of this
Agreement shall be addressed to Centrum in care of its President at 6135 Trust
Drive, Suite 104A, Holland, Ohio 43528 with a copy to John W. Hilbert II, Esq.,
Fuller & Henry P.L.L., One SeaGate, 17th Floor, P. O. Box 2088, Toledo, Ohio
43603 and any notice to be given to Employee shall be addressed to him at 4138
Mountain Laurel Drive, Erie, Pennsylvania 16510, or at such other address as
either party may hereafter designate in writing to the other. Any such notice
shall be deemed duly given when mailed by prepaid regular, registered, or
certified mail.
SECTION 15 - BINDING EFFECT. This Agreement shall be binding upon
Employee and his executors administrators, and representatives and assigns, and
upon Centrum and its successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first set forth above.
CENTRUM INDUSTRIES, INC.
By: /s/ George H. Wells
------------------------------------
George H. Wells, President and
Chief Executive Officer
"EMPLOYEE"
/s/ Timothy M. Hunter
------------------------------------
Timothy M. Hunter
5
<PAGE> 1
EXHIBIT 10.20
CENTRUM INDUSTRIES, INC.
STOCK OPTION AGREEMENT
THIS AGREEMENT is made as of this 29th day of February, 1996, by and between
Centrum Industries, Inc., a Delaware corporation ("Centrum") and Timothy M.
Hunter ("Employee").
WHEREAS, pursuant to the Agreement and Plan of Reorganization between
Centrum, Centrum Merging Corporation, and McInnes Steel Company ("McInnes")
dated December 5, 1995, as amended February 5, 1996, Centrum has agreed, upon
the Employee's election to defer cash payment for the Employee's options for
McInnes common stock, to grant an option to purchase shares of Centrum's common
stock, effective upon the Effective Date of Merger, as defined therein,
according to the terms and conditions of this Stock Option Agreement; and
NOW THEREFORE, in consideration of the mutual covenants contained in this
Agreement, the parties hereto agree as follows:
SECTION 1 - GRANT OF OPTION. Centrum hereby grants to Employee the right
and option to purchase from it, on the following terms and conditions, all or
any part of an aggregate of Forty-Four Thousand One Hundred Thirty-Three
(44,133) shares of Centrum's common stock $.05 value (the "Shares"). The
purchase price for all Shares shall be 64/00 Dollar ($.64) per share,
exercisable and payable as hereinafter provided.
SECTION 2 - EXERCISE OF OPTION; CHANGE OF CONTROL. Except as otherwise
expressly set forth herein, the Employee may elect to exercise the option at
any time after the Effective Date of Merger. Notwithstanding the above, if
Centrum's officers or directors execute a letter of intent (binding or
non-binding) by which Centrum will become a party to a transaction which will
effect a "Change of Control" of Centrum, Employee must exercise his options
within the thirty (30) day period following the date of notice to Employee that
a letter of intent has been entered into, or else the option and all rights
granted by this Agreement, to the extent those rights have not been exercised,
will terminate and become null and void. No partial exercise of such option
may be for less than one (1) full Share. For purposes of this Agreement
"Change of Control" shall be effected if (i) Centrum merges with or into or
consolidates with another corporation following the requisite approval of the
shareholders of Centrum of such merger or consolidation and, after giving
effect to such merger or consolidation, less than fifty-one (51%) of the then
outstanding voting securities of the surviving or resulting corporation
represent or were issued in exchange for voting securities of Centrum
outstanding immediately prior to such merger or consolidation; (ii) there is a
sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all or substantially all the assets of Centrum
following the requisite approval of the shareholders of Centrum of such
transaction or series of transactions; or (iii) the requisite approval of the
shareholders
<PAGE> 2
of Centrum is obtained to approve any plan or proposal for the liquidation or
dissolution of Centrum. The option shall be exercisable only by Employee
during his lifetime and only if Employee was an employee of McInnes, Centrum or
a Centrum affiliate on the date three (3) months prior to the date of exercise.
If Employee is disabled within the meaning of Section 22(e)(3) of the Internal
Revenue Code of 1986, as amended (the "Code"), the reference to the three (3)
month period above shall be read as one (1) year.
SECTION 3 - METHOD OF EXERCISE. The option granted under this Agreement
shall be exercisable as provided above, upon written notice to Centrum and the
payment in cash to Centrum of the full purchase price of the Shares which the
Employee elects to purchase.
SECTION 4 - TERMINATION OF EMPLOYMENT. In the event that an Employee shall
cease to be employed by McInnes, Centrum, or a Centrum affiliate, whether
voluntarily or involuntarily, for any reason other than death or disability,
all of Employee's rights to further exercise his option(s) shall expire ten
(10) days after the date of termination of employment; provided, however, that
no option shall be exercisable after the expiration date set forth in Section
6. A leave of absence with the express written consent of Centrum shall not be
considered termination of employment for purposes of this Section 4.
SECTION 5 - DEATH OR DISABILITY OF EMPLOYEE. In the event of the death or
disability of an Employee while employed by McInnes, Centrum, or a Centrum
affiliate, his right to purchase Shares may be exercised (to the extent that
Employee was entitled to do so at the date of his death or disability) by him
or, in the case of the death of Employee, by his personal representative or by
any person or persons who shall have acquired the option directly from Employee
by will or by the laws of descent and distribution, at any time within three
(3) months after the date of his death or disability; provided that if an
Employee is disabled as defined in Section 2 of this Agreement, the three (3)
month period referred to above shall be read as one (1) year. Notwithstanding
anything herein to the contrary, no option shall be exercisable after the
expiration of the term of the option set forth in Section 6.
SECTION 6 - TERMINATION OF OPTION. The option and all rights granted by
this Agreement, to the extent those rights have not been exercised will
terminate and become null and void at 5:00 p.m. on February 28, 2006.
SECTION 7 - SHARES AS INVESTMENT. By accepting this option, the Employee
acknowledges that any and all Shares purchased pursuant to the exercise of the
option under this Agreement shall be acquired for investment and not for
distribution, and upon the delivery of any and all of the Shares due to the
exercise of the option granted hereunder, the Employee shall deliver to Centrum
a representation in writing and in a form acceptable to Centrum that such
Shares are being acquired in good faith for investment and not for
distribution. This Section 7 shall not apply in the event that the Shares have
been registered pursuant to the Securities Act of 1933 and applicable state
securities laws.
2
<PAGE> 3
SECTION 8 - RESTRICTIONS ON SHARES. The Shares issued pursuant to the
exercise of the option granted in Section 1 shall not be registered under
federal securities laws or the securities of any state and will, therefore, be
deemed restricted and certain restrictions will be applicable upon the resale
of such security. Each Share will, upon issuance, contain a restrictive legend
in substantially the following form:
The common stock represented by this certificate has not been
registered under the Securities Act of 1933, as amended or under the
securities laws of any state. Each holder desiring to transfer the
common stock must furnish Centrum with a written opinion reasonably
satisfactory to Centrum in the form and substance from counsel
reasonably satisfactory to Centrum by reason of experience to the
effect that the holder may transfer the common stock as desired without
registration under the Securities Act or the securities laws of any
state.
This Section 8 shall not apply in the event that the Shares have been
registered pursuant to the Securities Act of 1933 and applicable state
securities laws.
SECTION 9 - DILUTION OR OTHER AGREEMENT. In the event that additional
Shares are issued pursuant to a stock split or a stock dividend, the number of
Shares then covered by each outstanding option granted hereunder shall be
increased proportionately with no increase in the total purchase price of the
Shares then so covered. If the issued and outstanding Shares are reduced by a
reverse stock split or other combination of Shares, (other than by a
transaction described in Section 3 of this Agreement), the number of Shares
then covered by each outstanding option granted hereunder shall be reduced
proportionately with no reduction in the total price of the Shares then so
covered. In the event that Centrum should transfer assets to another
corporation and distribute the stock of such other corporation without the
surrender of Shares, and if such distribution is not taxable as a dividend and
no gain or loss is recognized by reason of Section 355 of the Code, or some
similar section, then the total purchase price of the Shares shall be reduced
by an amount which bears the same ratio to the total purchase price then in
effect as the market value of the stock distributed with respect to the Shares
immediately following the distribution, bears to the aggregate of the market
value of such time of a Share and the stock distributed in respect thereof. No
fractional shares shall be issued, and any fractional Shares resulting from the
computations pursuant to this Section 10, shall be eliminated from the option.
No adjustment shall be made for cash dividends or the issuance to stockholders
of rights to subscribe for additional Shares or other securities.
SECTION 10 - RIGHT OF SHAREHOLDER. The Employee shall not have any rights
or privileges of a shareholder of Centrum in respect with the Shares
transferable upon exercise of the option granted under this Agreement, unless
and until certificates representing such Shares shall have been endorsed,
transferred, and delivered and the transferee has caused his name to be entered
as the shareholder of record on the books of Centrum.
3
<PAGE> 4
SECTION 11 - NON-TRANSFERABILITY. The option shall not be transferable and
the option may be exercised, during the lifetime of the Employee only by him.
Except as specifically provided in this Agreement, the option may not be
assigned, transferred, pledged or hypothecated in any way, shall not be
assignable by operation of law, including but not limited to a decree in a
domestic relations proceeding, and shall not be subject to execution,
attachment or similar process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of the option, and the levy of any
execution, attachment, or similar process upon the option in violation of this
Agreement, shall be null and void and without effect.
SECTION 12 - AFFILIATE. As used herein, the term "affiliate" shall mean
any present or any future corporation which would be deemed an affiliate of
Centrum in Rule 12b-2 of the regulations promulgated pursuant to the Securities
Exchange Act of 1934.
SECTION 13 - NOTICES. Any notice to be given under the terms of this
Agreement shall be addressed to Centrum in care of its President at 6135 Trust
Drive, Suite 104A, Holland, Ohio 43528 with a copy to John W. Hilbert, Esq.,
Fuller & Henry P.L.L., One SeaGate, 17th Floor, P.O. Box 2088, Toledo, Ohio
43603 and any notice to be given to Employee shall be addressed to him at 4138
Mountain Laurel Drive, Erie, Pennsylvania 16510, or at such other address as
either party may hereafter designate in writing to the other. Any such notice
shall be deemed duly given when mailed by prepaid regular, registered, or
certified mail.
SECTION 14 - BINDING EFFECT. This Agreement shall be binding upon Employee
and his executors administrators, and representatives and assigns, and upon
Centrum and its successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first set forth above.
CENTRUM INDUSTRIES, INC.
By: /s/ George H. Wells
------------------------------
George H. Wells, President and
Chief Executive Officer
"EMPLOYEE"
/s/ Timothy M. Hunter
---------------------------------
Timothy M. Hunter
4
<PAGE> 1
EXHIBIT 10.21
MCINNES STEEL COMPANY
AND ITS SUBSIDIARIES
BONUS AND STOCK OPTION PLAN
1. "Profit" for purposes of this Plan shall be defined as pretax profit of
McInnes, before corporate administrative charge and before bonus payments.
12.5% of the profit shall be paid in cash bonus to the employees of McInnes
based upon the following distribution:
25% to key employees - maximum of 3 people in this category;
25% to key managers - which shall be limited to a maximum of 7 people;
and
50% to all salaried employees.
2. For every $100,000 of Profit, options for 10,000 shares of Centrum Stock
shall be set aside for McInnes management. The stock options shall be at
market as of the close of business on the last day of Centrum's fiscal year.
The options shall be valid for a 10-year period and be subject to the
detailed provisions of Centrum's stock option agreement, similar in form to
the stock agreements signed in connection with the merger of Centrum
Subsidiary into McInnes Steel Company with respect to "roll-over options."
The options shall be distributed as follows:
60% to "key employees" as described in Section 1 of this Plan; and
40% to "key managers", which shall be limited to a maximum of 7 people.
Through fiscal year ended 3/31/96
<PAGE> 1
EXHIBIT 10.22
MICAFIL, INC.
1. "Profit" for purposes of this Plan supplement shall be defined as pretax
profit of Micafil, before corporate administrative charges and before bonus
payments. Twelve and one-half percent (12.5%) of the profit shall be paid
in cash bonus to the employees of Micafil based upon the following
distribution:
25% to key employees - Maximum of 3 people in this category;
25% to key managers - which shall be limited to a maximum of 7 people;
and
50% to all salaried employees.
2. For every $100,000 of Profit, stock options for 10,000 shares of Centrum
stock shall be set aside for management of Micafil. The stock options shall
be at market as of the close of business on the last day of Centrum's fiscal
year. The options shall be valid for a 10-year period and be subject to the
detailed provisions of Centrum's stock option agreement. The options shall
be distributed as follows:
60% to "key employees" as described in Section 1 of this Plan
supplement; and
40% to "key managers", which shall be limited to a maximum of 7 people.
Through fiscal year ended 3/31/96
<PAGE> 1
EXHIBIT 10.23
AMERICAN HANDLING, INC.
1. "Profit" for purposes of this Plan shall be defined as pretax profit of AHI,
before corporate administrative charges and before bonus payments. Twenty
percent (20%) of the profit shall be paid in cash bonuses to the employees
of AHI based upon the following distribution:
50% to "key employees" - no more than three people may be included
in this category;
25% to all other salaried employees; and
25% to all hourly employees.
2. Five percent of profit shall be paid into the profit sharing retirement plan
and allocated to employees in accordance with the terms and conditions of
such plan.
3. For every $100,000 of Profit, options for 10,000 shares of Centrum Stock
shall be set aside for AHI management. The stock options shall be at market
as of the close of business on the last day of Centrum's fiscal year. The
options shall be valid for a 10-year period and be subject to the detailed
provisions of Centrum's stock option agreement. The options shall be
distributed as follows:
60% to "Key employees" as described in Section 1 of this Plan
supplement; and
40% to "Key managers", which shall be limited to a maximum of 7
people.
Through fiscal year ended 3/31/96
<PAGE> 1
CENTRUM INDUSTRIES, INC. EXHIBIT 11
WEIGHTED SHARES OUTSTANDING
MARCH 31, 1996
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
- ----------------------
SHARES DAYS
DATES OUTSTANDING OUTSTANDING AVERAGE
----------------- ------------ ----------- -------
<S> <C> <C> <C>
4/01/95 - 4/11/95 5,745,360 11 172,675
4/12/95 - 4/12/95 5,735,360 1 15,670
4/13/95 - 4/19/95 5,715,360 6 93,694
4/19/95 - 12/17/95 5,685,360 242 3,759,172
12/18/95 - 1/24/96 5,705,360 36 561,183
1/13/96 - 2/11/96 5,778,360 28 442,060
2/12/96 - 2/15/96 5,829,360 3 47,782
2/16/96 - 2/21/96 5,841,360 5 79,800
2/22/96 - 2/22/96 5,853,360 1 15,993
2/23/96 - 2/27/96 5,949,360 4 65,020
2/28/96 - 2/29/96 5,985,360 1 16,353
2/29/96 - 2/29/96 5,997,360 1 16,386
3/01/96 - 3/3/96 6,009,360 2 32,838
3/4/96 - 3/6/96 6,027,360 2 32,936
3/7/96 - 3/7/96 6,075,360 1 16,599
3/8/96 - 3/11/96 6,126,360 3 50,216
3/12/96 - 3/31/96 6,170,860 19 320,345
---- ---------
366 5,738,725
==== =========
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCK EQUIVALENTS NET
- ------------------------ AVERAGE OUTSTANDING
EXERCISE MARKET NET SHARE DAYS WEIGHTED
NUMBER PRICE PROCEEDS PRICE REPURCHASED INCREASE OUTSTANDING AVERAGE
- -------------------------- -------- --------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
201,521 0.04 7,497 1.50 4,998 196,523 366 196,523
110,333 0.06 7,061 1.50 4,708 105,625 23 6,638
333,334 0.75 250,001 1.50 166,667 166,667 366 166,667
350,000 1.00 350,000 1.50 233,333 116,667 312 99,454
63,400 1.00 63,400 1.50 42,267 21,133 366 21,133
223 1.00 223 1.50 149 74 223 45
480,000 1.00 480,000 1.50 320,000 160,000 32 13,989
-------
504,449
=======
</TABLE>
<TABLE>
<S> <C>
Weighted average common shares outstanding 5,738,725
Weighted average common equivalent shares outstanding 504,449
----------
6,243,174
==========
Net income $ 805,240
==========
Weighted average common and common equivalent shares outstanding 6,243,174
==========
Earnings Per Share $ 0.13
==========
</TABLE>
<PAGE> 1
EXHIBIT 21
CENTRUM INDUSTRIES, INC.
Direct and indirect subsidiaries of Centrum:
American Handling, Inc.
Micafil, Inc.
LaSalle Exploration, Inc.
McInnes Steel Company
McInnes Services, Inc.
Erie Bronze and Aluminum Company
Eballoy Glass Products Company
McInnes International, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,100,749
<SECURITIES> 0
<RECEIVABLES> 11,072,927
<ALLOWANCES> 93,761
<INVENTORY> 9,395,244
<CURRENT-ASSETS> 23,195,165
<PP&E> 11,376,761
<DEPRECIATION> 314,560
<TOTAL-ASSETS> 40,611,748
<CURRENT-LIABILITIES> 24,219,677
<BONDS> 0
0
3,500
<COMMON> 308,543
<OTHER-SE> 3,270,949
<TOTAL-LIABILITY-AND-EQUITY> 40,611,748
<SALES> 27,525,702
<TOTAL-REVENUES> 27,638,720
<CGS> 20,306,567
<TOTAL-COSTS> 26,060,128
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 515,538
<INCOME-PRETAX> 1,063,054
<INCOME-TAX> 257,814
<INCOME-CONTINUING> 805,240
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 805,240
<EPS-PRIMARY> .13
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1994
<PERIOD-END> MAR-31-1994
<CASH> 87,149
<SECURITIES> 0
<RECEIVABLES> 1,489,349
<ALLOWANCES> 64,047
<INVENTORY> 1,252,716
<CURRENT-ASSETS> 3,450,374
<PP&E> 1,180,201
<DEPRECIATION> 74,712
<TOTAL-ASSETS> 7,941,039
<CURRENT-LIABILITIES> 5,810,033
<BONDS> 0
0
3,500
<COMMON> 273,653
<OTHER-SE> 818,354
<TOTAL-LIABILITY-AND-EQUITY> 7,941,039
<SALES> 8,760,667
<TOTAL-REVENUES> 8,806,453
<CGS> 6,668,265
<TOTAL-COSTS> 9,389,965
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 240,338
<INCOME-PRETAX> (1,112,897)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,112,897)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,112,897)
<EPS-PRIMARY> (.26)
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 472,673
<SECURITIES> 0
<RECEIVABLES> 3,334,377
<ALLOWANCES> 60,658
<INVENTORY> 1,111,196
<CURRENT-ASSETS> 5,393,369
<PP&E> 1,278,968
<DEPRECIATION> 156,987
<TOTAL-ASSETS> 9,547,336
<CURRENT-LIABILITIES> 4,432,101
<BONDS> 0
0
3,500
<COMMON> 287,268
<OTHER-SE> 1,214,980
<TOTAL-LIABILITY-AND-EQUITY> 9,547,336
<SALES> 18,292,696
<TOTAL-REVENUES> 18,353,071
<CGS> 13,516,489
<TOTAL-COSTS> 17,634,857
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 331,287
<INCOME-PRETAX> 386,927
<INCOME-TAX> 223,679
<INCOME-CONTINUING> 163,248
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 163,248
<EPS-PRIMARY> .03
<EPS-DILUTED> 0
</TABLE>
